Rapid Assessment for Resilient Recovery and ... - GFDRR

Aside from the impact of the proposed measures on the structure/capital adequacy/competitiveness
of SFIs, it would also appear that the measures as currently designed might
not have optimal impact. This needs to be looked at thoroughly and over more time than
has been available for this rapid assessment, but some initial thoughts on what could be
improved are included in the next section.
The assessment did not uncover any current government schemes specifically focused on
microfinance. There was mention in the press of a THB 90 billion package (as a subcomponent
of the THB 325 billion funding package) to fund micro-entrepreneurs, but this
was never corroborated in any meetings or other research.
The ability of the government, including the National Village Fund or the Cooperative
Promotion Department, to determine the needs of its members, appears to be woefully
inadequate. A lack of reasonable management information systems, insufficient computerization,
and apparent disconnect between the central office and the actual MFIs mean that
degree of need is unknown.
Another challenge linked with this sector is the reputation that cooperatives and village
funds are not distributing funds equally, but rather to those who are close to the heads of
villages or of cooperatives.
Insurance Sector
This catastrophic event may lead the international reinsurance market to reconsider
Thailand as a high-risk country subject to catastrophe risks for the reinsurance season
starting January 1, 2012. This would imply limited reinsurance capacity, and/or lower
coverage limits and/or higher reinsurance premium rates. The capacity of the government
of Thailand to manage major floods so that the international reinsurance market does not
think that such an event can happen again or at least too frequently is critical to restoring
confidence of the reinsurance market.
According to the OIC, the vast majority (95 percent) of 2011 flood-related property catastrophe
risk insurance business underwritten by the domestic insurers is reinsured. This
means that the net retention of the domestic insurers should not exceed THB 15 billion.
(In fact, it is estimated that it will be closer to THB 9.1 billion, as per the previous section.)
The domestic insurers should then be able to pay their claims in full, although some of the
smaller insurers may see their capital significantly depleted and thus may face the problems
of capital adequacy. 70 Thai RE 71 is the only reinsurer in the country, and 5 percent
of all insurance policies in Thailand must be reinsured by Thai RE. It was not possible to
uncover what proportion of this risk is then re-reinsured abroad, but it is a worrying sign
that between August and November 2011, Thai RE’s share price tumbled from THB 7.0 to
3.9 per share. What the team heard, though, is not that Thai RE would not honor claims,
but rather that it would very possibly need additional capital to stay above minimum CAR
70 According to representatives of the Thailand Reinsurance Brokers’ Council. It was not possible to get any estimates of the
assets of these companies, nor of the level of funding they would need to remain above the minimum capital adequacy ratio.
71 Thai RE is a publically traded company that is 30 percent owned by Thai insurance companies.
70 THAI FLOOD 2011 RAPID ASSESSMENT FOR RESILIENT RECOVERY AND RECONSTRUCTION PLANNING