New "terrorism insurance" package launched for Thai businesses

Thai Reinsurance, the country's leading reinsurer, is preparing to launch a repackaged terrorism insurance policy for local businesses.

The new package to be launched next week, possibly called a "political violence insurance policy", would provide simple, stand-alone comprehensive coverage of property damage caused during strikes, riots, civil unrest and terrorism, said Surachai Sirivallop, chief executive of Thai Re.

"We have been overwhelmed by calls for terrorism and political violence coverage since the riots and arson attacks took place," said Mr Surachai. "Political riots and widespread torching have also led foreign reinsurers to think twice about quoting (premiums), as such events have never happened before in Bangkok."

The army started its operation to disperse red-shirt protesters from Ratchaprasong intersection in the morning of May 19. By that afternoon riots had broken out across the city, but neither local insurance firms or foreign reinsurers were willing to issue terrorism coverage for Thai businesses.

Most insurers were initially caught off guard when quoting prices, as the destruction caused during the riots had not taken place before in Bangkok.

Most reinsurers are now open to selling new policies to Thai businesses, but the prices have increased, he said.

Reinsurers generally draw on their historical experience to make precise estimates of expected losses and risk exposure. Underwriters price their policies differently depending on where the business is based, the size and type of its assets and security systems in place at the property.

Terrorism insurance first emerged in the local market about six years ago. Unrest in Thailand's restive southern border provinces led Thai Reinsurance, through its partnership with Bangkok Insurance, to develop terrorism coverage for both individuals and property as an addition to personal accident and property policies.

In general, the premium for terrorism coverage was then around 0.5 per cent of the sum insured. The recent political violence has resulted in demonstration premiums for terrorism coverage for Bangkok retailers increasing to about 1 per cent of the sum insured, compared with just 0.2 per cent in 2008.

International firms were said to have increased their rates for terrorism coverage in Thailand to as much as 2 per cent, compared with a global average of about 1 per cent.

"Thailand is no longer the same in the perspective of international reinsurers. (The political) climate has changed, and the risk has changed," said Mr Surachai. "We also don't know what's going to happen in the future, as we expect the red shirts are likely to go underground in fighting the government."

Mr Surachai said the premium charge for a new stand-alone policy would vary from 0.5 per cent to 3 per cent of the sum insured based on the location's risk profile, the sum insured and the size of the property.

Bangkok Insurance and Thai Reinsurance are capable of accepting an insured sum up to 50 million baht. Sums insured beyond that amount would be subject to negotiation.