Rapid Assessment for Resilient Recovery and ... - GFDRR

should be carefully estimated and any potential liquidity gap should be managed through
retention, such as reserves and contingent credit, and risk transfer, such as (parametric)
insurance. 220 A program to develop an improved disaster risk financing strategy would
normally cost around THB 12 million.
Develop an insurance program for public assets Public buildings and infrastructure
can be particularly affected by natural disasters, particularly floods. The government
could identify and prioritize critical public assets and develop a catastrophe risk insurance
program for those assets. This would ensure that funds would be immediately available
post-disaster for their rehabilitation and/or reconstruction. This strategy could rely on either
(i) the placement of a group insurance policy for key public assets, or (ii) the establishment
of a dedicated fund for the insurance of public assets. Developing such an insurance
program would normally cost around THB 12 million.
Promote the property catastrophe risk insurance market for private dwellings and
SMEs The property catastrophe risk insurance market is still under-developed in
Thailand. It is estimated that less than one percent of the private dwellings are insured
against natural disasters, and particularly floods. The government could support the
development of a property catastrophe risk (re)insurance pool, which would allow domestic
insurers to pool their catastrophe risks and access the international market with a single,
more diversified portfolio when it is the most efficient. The government could support
this program by providing (i) technical assistance to the private insurance industry for the
preparation of this program, (ii) a line of credit to the newly established pool during its first
years of operations to help it retain some risk, and (iii) provide reinsurance capacity of last
resort, beyond the private reinsurance layer, to cover extreme losses. The government
could also assist the private insurance industry in developing new delivery channels to
increase property catastrophe risk insurance penetration among homeowners and SMEs.
Based on international experience, there may be a need for some compulsion to generate
a stable and large enough business for the pool. In Turkey for example, earthquake
insurance is compulsory for urban homeowners. One could also explore a compulsory
catastrophe risk insurance policy for mortgages. Assumed costs are THB 30 million for
the design of this catastrophe risk insurance pool (including operational manual), and a
THB 1.5 billion line of credit from the government, to back a total of THB 3 billion in the
pool. No other cash injection from the government would be assumed at this stage. Note
that these figures are very rough estimates that will need to be reviewed during the design
stage.
Promote agricultural insurance Farmers are particularly affected by the floods. Building
on the ongoing rice insurance pilot program, an agricultural insurance pool could be
developed for the agricultural sector.
220 Existing government planned spending on the current flooding is still emerging, but includes about THB 20 billion
for disaster relief scheme of households (THB 5,000 each), THB 40 billion (US$1.3 billion) under the agricultural disaster
relief scheme (THB 2,222 per rai), up to THB 230 billion of grants/write-offs to the financial sector, THB 5 billion in energy
subsidies, an unknown amount of corporate tax rebates/holidays, and the list surely goes on.
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