Rapid Assessment for Resilient Recovery and ... - GFDRR

Financial and Insurance Sector
Summary
It is noted that very little tangible data was available during the rapid assessment to determine
losses and needs of the financial sector. Thus the figures in this report should be
considered as indicative and preliminary. These figures have helped identify key issues for
focus, but not the exact level of the problem. It is highly desirable that more exact figures
be obtained in the months to come, and to this end, questionnaires that could not be
meaningfully completed by large enough samples at this early stage are included in Annex
10.
The assessment determined that damage to banks, specialized financial institutions
(SFIs), insurance and other companies appears to be minor in comparison to the assets of
these sub-sectors. Also comforting is that the commercial banking sector has ample liquidity
to not only absorb their portfolio and interest rate losses, but also to offer the necessary
financing to creditworthy borrowers to counter the impact of the floods.
SFIs are a pressing issue in large part because they are being asked to fund research
on the impact of this crisis on many of their clients, without being given the funds needed
to do this up front. This further blurs the distinctions between banking and public financing.
At the same time, some SFIs are increasingly competing with private banks, without
being subject to the same conditions. This is important as it may erode the credit culture
in many parts of the country and weaken some key SFIs. It is especially worrying as SFIs
comprise around 25 percent of the banking system and yet are not supervised fully by the
Bank of Thailand (BOT).
This report suggests that the financial sector is responsible for a total of approximately
THB 1,357 billion in damage and losses to the economy. This can be compared to a figure
for liquid assets 42 in the banking sector of THB 2,100 billion. 43 Regardless of the proportion
of the damage and losses that the private sector will seek to finance through banks,
this would suggest that the commercial banking sector (not including SFIs) would have
more liquidity than necessary to finance reconstruction, meaning external funding would
not be necessary. However, this does not take into consideration the banks’ willingness to
lend to many of those impacted by the floods.
Insurance is a very concerning issue, and the high level issues and possible solutions are
discussed in the Disaster Risk Management chapter. This chapter, however, focuses on
the impact on the financial sector. Despite the significant level of claims expected from
these floods, it appears that around 95 percent of the claims are re-insured abroad. From
this, one would expect that all insurance companies would be able to honor these claims.
Nevertheless, some local insurance companies are expected to be heavily impacted, and
the only local reinsurer, Thai RE, has already seen the value of its shares fall 43 percent.
42 Defined by the BOT as: eligible securities, deposits with BOT and cash-at-hand. The eligible securities comprise Thai
Government Securities, Bank of Thailand bonds and debt instruments guaranteed both principle and interest by the
Ministry of Finance or FID.
43 Taken from the BOT website, as of September 20, 2011. Of that figure, THB 1.5 trillion would be in the hands of Thai
commercial banks.
THAI FLOOD 2011 RAPID ASSESSMENT FOR RESILIENT RECOVERY AND RECONSTRUCTION PLANNING
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