Thailand’s Political Unrest Boosts Commercial Risk Exposures

Commercial businesses are facing the threat of tangible and intangible economic losses from the Thai protests, which are intensifying the risk exposures of the country.

The circumstances in Thailand are still confusing, said Surachai Sirivallop, chief executive of Thailand Reinsurance Public Co. Ltd. The insurance and reinsurance industry has yet to define the incident.

The anti-government protest led by the Red Shirt protestors was described as a terrorism act by the government. However, Sirivallop said "no one could tell you what's happening. You hear one thing but you have to judge on it."

The situation is still very difficult in Thailand, said Sirivallop in an interview.

The economy has been undermined by the political crisis. Nearly all business was halted last week in Bangkok. Insurance broker Lockton said in a statement "as the situation on the ground in Bangkok remains very volatile, the decision has been made to keep the office closed for the remainder of the week."

So far, more than 30 buildings have been damaged because of the protests, with losses estimated at about 30 billion to 40 billion baht (US$911.5 million to $1.2 billion). However, Sirivallop said it is hard to evaluate insurance losses from the incidents. At the moment, people are still not allowed to go into the damaged buildings.

In Bangkok, losses from fires at the shopping complexes are being assessed. Central Pattana Public Co. Ltd., developer of CentralWorld, "had brought all types of insurance," said Kobchai Chirathivat, president and chief executive officer of the company,

"As for the property damage caused by the fire, because this tragic incident concerns several parties, we have to wait for detailed fire damage assessments from agencies concerned and the insurance company before we will be able to release any information," said Chirathivat, in a statement.

The intangible economic losses, such as business interruption, are a substantial area of risk exposure. In Thailand, special political and terrorism risks are covered as additional policy on top of normal property/casualty insurance.

"It's early to say the impact" on Thailand's insurance landscape, said Geoff Lambrou, head of Bowring Marsh Asia, a specialist insurance placement unit of international intermediary Marsh.

However, Lambrou said there has been an increasing awareness for more comprehensive risk coverage in Thailand. Capacity is available in the market depending on the cost and size of the risk.

In the wake of political unrest, tourism sectors such as hotel and aviation have been concerned with political risk. Business interruption is another exposure, according to FTI International Risk President and Chief Executive Officer Steve Vickers.

The outlook for Thailand is "grim" in the medium term, said Vickers. Companies need to understand political risk and its impact on particular business areas while the political outcome should be closely reviewed. Vickers said corporations should create contingency plans in accordance to their business nature and need.

(By Iris Lai, Hong Kong bureau manager: [email protected])