This report does not constitute a rating action.
The Thai insurance sector is benefiting from its risk-strengthening measures. Over the years, many companies have increased their reinsurance coverage to safeguard against natural catastrophe losses following a major flood in Thailand in 2011. We believe these efforts will help cap their final losses from a recent earthquake in neighboring Myanmar that also caused damage in and around Bangkok.
What's Happening
Claims for Thai property and casualty (P/C) insurers will see higher-than-usual claims as a result the 7.7-magnitude earthquake that struck Myanmar in March 2025. The reverberations damaged high-rise residential and commercial buildings in the vicinity of Bangkok, which is 600 miles away from the epicenter. It also caused the deadly collapse of a building under construction in Bangkok.
The margin pain for P/C insurers in Thailand will be lower relative to past major events. That's because global and regional reinsurers will largely absorb Thailand's insured losses from this event.
Why It Matters
We estimate insurance losses for Thai P/C insurers at Thai baht (THB) 20 billion-THB30 billion (US$600 million-US$900 million).
This makes it a smaller insured loss event compared with the total claims of about THB150 billion (US$4.5 billion) related to COVID lump-sum insurance payout in 2022 and the massive floods in 2011, which cost the insurers THB500 billion (US$15 billion).
The P/C insurance sector's final earthquake-claim costs will be manageable, in our view, because:
- We anticipate that a substantial portion of the insured losses will be covered under the excess of loss reinsurance policies that most P/C insurers acquired, particularly insurers rated by S&P Global Ratings. Since the 2011 floods, the sector has improved its reinsurance coverage against natural catastrophe risks.
- P/C insurance policies with natural-catastrophe coverage generally include sub-limits for various perils, such as earthquakes. For example, home fire insurance policy typically covers up to THB20,000 (US$586) loss per year from earthquakes, according to the Thailand General Insurance Association. Similarly, sub limits are applied to industrial all-risks insurance policies.
- Thailand's insurance penetration remains low at around 1.6% with minimal awareness of earthquake protection due to its perceived remoteness. Coverage on earthquake risk is typically bundled within natural catastrophe risks in insurance policies.
What Comes Next
Insurance offerings will expand to cover more risks. We expect reinsurers will work with local insurers to widen their earthquake-related offerings and potentially add more explicit terms and conditions on such exposures.
Reinsurance rates will likely rise. As reinsurers are likely to bear the brunt of the earthquake losses, we foresee a rise in reinsurance premium rates. Consequently, the profit margin for Thai P/C insurers may compress over the next two years, unless they maintain profitability through a combination of volume growth and better risk selection.
Risk-models will improve to better suit Thai earthquake risks. This includes Bangkok's soft soil profile. We also expect insurers and reinsurers to collaborate with natural catastrophe modelers to refine risk models--e.g., by incorporating the relationships between low-frequency seismic waves, soil conditions, and building heights as additional parameters. Fine-tuning risk models will allow insurers and reinsurers to attain greater accuracy in risk assessments and resilience in disaster preparedness.
| Primary Contact: | Billy Teh, Singapore 65-6216-1069; billy.teh@spglobal.com |
| Secondary Contacts: | Philip P Chung, CFA, Singapore 65-6239-6343; philip.chung@spglobal.com |
| Trupti U Kulkarni, Singapore 65-6216-1090; trupti.kulkarni@spglobal.com |
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