Finance Minister Apisak Tantivorawong is urging local insurers to have a master plan to strengthen their financial positions and enlarge their business size, enabling them to insure the government's big-ticket infrastructure projects worth 3 trillion baht without reinsuring with overseas companies.
It is necessary for these infrastructure megaprojects to be insured and the premiums should be shared among insurance firms with operations in Thailand without reinsuring outside the country, he said.
Thai insurance companies must now enter into reinsurance agreements with overseas companies because they are short of capability to cover risk in its entirety, Mr Apisak said.
Insurers' total assets amounting to 3.9 trillion baht represent 24-25% of the country's GDP, far below the banking sector's amount in terms of economic value.
Mr Apisak said it's crucial for insurance companies to arrange a master plan in line with the planned infrastructure projects, as the government does not want to see insurance businesses here dwarfed.
Although workers in the insurance business still want the government to protect local operators because they are afraid of losing their competitive edge if the market is fully liberalised, technology lowers barriers to entry, the finance minister said. Calls for a freer insurance market are increasing, he said.
Mr Apisak referenced the master plan arranged after Thailand plunged into the 1997 Asian financial crisis, noting how it helped local financial institutions steer through the 2008 crisis. But that master plan did not aim to enlarge their size, so local financial institutions could not compete with their Asean peers in the international market.
Earlier, Oran Vongsuraphichet, chief executive of Thaire Insurance Plc, put Thailand's reinsurance market value at 78 billion baht, of which 5 billion is undertaken by the company, 7 billion is reinsured among insurance companies and the remainder comes from overseas reinsurance firms.
He said Thaire can reinsure up to 70 billion baht, but it needs to raise its capital base to at least 70 billion. Thaire is the country's largest reinsurance company.
In the meantime, Mr Apisak said the Indonesian rupiah slide would not affect the Thai economy, given the country's solid fiscal position and external factors.
The country's public debt stood at 41% of GDP at the end of June, below the 60% threshold, and 4.17% of public debt was foreign-denominated debt. Foreign reserves amounted to US$205.5 billion, representing 3.5 times short-term debt.
Thailand has been unscathed by the emerging-market currency turmoil, with the baht holding firm as several currencies depreciate against the greenback. The local currency sporadically becomes stronger from capital inflows, Mr Apisak said.
Even so, policymakers have discussed preparing measures to avoid a local impact, he said.
