Year 2007

Nevertheless, there are still many factors adversely affecting the economy, such as oil price volatility, which has an impact
on a global scale, and consumer goods prices, including agricultural produce prices as more agricultural produce are used to
generate alternative energy. Additionally, the sub-prime mortgage crisis in the US has contributed to the slowdown in the US
economy, resulting in a weaker US dollar and a stronger Thai Baht, so slowing down Thai export growth since Thailand exports
more to the US as compared to other countries. In contrast, this is also a good opportunity for the country to import machinery and
other equipment to be used for production and the construction of mega-projects. Based on factors boosting the Thai economy,
together with the problems the country is facing, the Bank of Thailand projects Thai economic growth of 4.5 to 6.0 percent in 2008.
For the outlook of the non-life insurance industry, it will benefit from the economic recovery that is expected to be evident
by the second half of 2008. This includes mega-project investments, enlargement of housing along electric train construction lines,
total sales of new brands of eco-cars, and increasing purchasing power brought about by tax adjustment measures. The negative
factor is that the Baht is likely to continue to appreciate, contributing to a decrease in premium written for aviation insurance.
By and large, personal line business is still able to expand significantly and is a major target business of non-life insurance
companies having a network and partners attracting personal customers. For high-risk insurance, like motor insurance, the
premium rates are enhanced for some customer groups with a great loss, to be in accordance with rising business costs.
Moreover, a reduction in compulsory motor insurance premium will cause small non-life insurance companies with a high
proportion of compulsory motor insurance to promptly adapt themselves in order to secure sufficient income for augmenting risks
and expenses. Meanwhile, for the underwriting of mega-projects, more cooperation can be expected among non-life insurance
companies.
It is also worth noting that so far the Office of Insurance Commission has drawn up a more stringent criterion for the insurance
capital, which is based on risk (RBC), corresponding with the Insurance Act (Volume 2) of 2008 and becoming effective as of
February 5, 2008. Though the criterion will not have an immediate impact since the law allows non-life insurance companies some
time to adapt before it takes effect. However, since companies with a problem of capital will have to increase their capital to meet
the requirement before the Act takes effect, we may see them resort to mergers in order to enhance their financial business and
competitiveness in the future.
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