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Big changes in industrial insurance policies coming, reduced coverage, higher price, shareholder shakeup & possibly insurance adjustor fees.

Insurance policies that cover damage to large factories on flooded industrial estates (like the one above) is an emerging issue in post-flood Thailand. 

Click button to listen to Flood Insurance Changes to download

Double whammy for local insurers, Foreign reinsurers' pricing strategy jeered by Charoen Kittikanya

Thai insurers have been caught off guard not only by the expected hefty losses from the severe flooding but also high fees charged by international adjusters.

Local insurers are crying foul that their adjusters' fees are fixed at 2% of the loss amount while those charged by foreign insurers are based on an hourly rate. 

Normal international practice is for adjusters' fees for petty claims to be charged at a flat 2% of the loss amount, which is capped at US$50 billion

For losses in excess of that, the fee is based on the working hours of the adjusters, which is anywhere from $50-210 an hour depending on the experience and position of individual adjusters.

Surachai Sirivallop, the chief executive of Thai Reinsurance Plc, the country's largest reinsurer, estimates flood losses for local non-life insurers will amount to 150-250 billion baht, although up to 90% of the figure has been reinsured.

"This is a double standard, taking advantage of troubled local insurers that must count on foreign reinsurers for the payout process," said the outspoken industry veteran.

It's unfair to charge different rates in the same market.

Mr Surachai said Thai insurers had raised the issue with the General Insurance Association in talks with international adjusters but did not receive a positive response.

Therefore, he wants the Office of the Insurance Commission in its capacity as regulator to help negotiate with the international adjusters to base their fees on the international standard. 

"If the regulator fails to get the fee changed, then insurance claims will carry higher adjusters' fees by Thai firms than their foreign counterparts operating here, resulting in lower competitiveness for Thai insurers," said Mr Surachai.

He predicts this year's widespread flooding will lead foreign reinsurers next year to more than double their pricing on flood and industrial all-risk (IAR) policies and reduce flood coverage limits.

Premiums on IAR policies that cover flood for industrial factories are now charged at only 0.01% to 0.03% of the sum insured with almost 100% of the sum covered. 

I believe premiums for IAR policies excluding flood will more than double, with flood coverage to be separated from IAR and charged at not less than 0.1%," said Mr Surachai. 

Given this year's crisis, flood coverage limits will likely be cut to only 20% of the sum insured next year.

Thailand will no longer be spared from being considered a risk for natural catastrophes by international reinsurers, he said.

The French state-owned reinsurer CCR has already written off its exposure in Thailand in line with New Zealand and Australia in light of the major natural calamities.

Four years ago, two leading international reinsurers - Munich Re and Swiss Re - also scaled back their exposure in Thailand, focusing only on select local clients.

Given the anticipated heavy losses from the floods, a number of local insurers will be forced to raise significant funds to tackle their claim payouts, leading to a major shareholder shakeup, particularly in Thai-foreign joint ventures, and wiping out Thai shareholders who fail to find new funding to match the foreign capital contribution," said Mr Surachai.

(Source: Bangkok Post, Double whammy for local insurers, Foreign reinsurers' pricing strategy jeered, 24/11/2011, Charoen Kittikanya, link) 

Insurance Industry Vocabulary

insurance - a system of protection against loss, a person pays money every month (premiums) for a guarantee that the company will pay them money if they or their property is damaged or lost (See Wikipedia)

insurance policy - the contract between the insurance company that sells insurance and the person with the insurance (policyholder) (See Wikipedia)
insurance policy X covers Y and Z - if bad events Y or Z happen (flood, earthquake, tsunami, etc) then the insurance policy will pay money

insurance premium - the amount charged for an insurance policy (the "insurance coverage" in the policy) 
premium - insurance premium

insurance coverage - insurance protection, when a person or a company has insurance that will pay them money to help them if some bad event happens

insurance claims - a request to your insurance company for an amount of money to be paid for loss or damage for which you are insured
claims - same as "insurance claims"
petty claims - small claims

insurance payouts - the amount of money paid by the insurance company for damage to a person who has insurance
claim payout - same as "insurance payout"

tackle - to make an organised and determined attempt to deal with a problem แก้ปัญหา จัดการกับปัญหา
raise significant funds to tackle their claim payouts

insured losses - losses included in your "insurance premium" from some accident, disaster, bad event
uninsured losses - losses not included in your "insurance premium" from some accident, disaster, bad event

claims adjuster - employees of an insurance company who determine how much the company must pay when there is a bad event, "investigate insurance claims by interviewing the claimant and witnesses, consulting police and hospital records, and inspecting property damage to determine the extent of the company’s liability", also called a "loss adjustor" or "insurance adjustor" (See Wikipedia)
insurance adjuster - same as "loss adjuster"
adjuster - same as "loss adjuster"

reinsurers - companies that buy insurance policies from other countries as part of risk management, this practice is called "reinsurance", "the main reason for insurers to buy reinsurance is to transfer risk from the insurer to the reinsurer"  
reinsurance - the insurance service that "reinsurers" provide (See Wikipedia)

double whammy - when two bad things happen at the same time (See urban dictionary)

local - in or related to the area that you live, or to the particular area that you are talking about ท้องถิ่น
local insurers - Thai insurers

jeer - to shout rude and insulting things at people to show that you do not like them
strategy - a plan to achieve a goal over a longer period of time (longer than a "tactic"; 'strategy' gives the big picture, 'tactics' the details)
foreign reinsurers' pricing strategy jeered

expected - believe will happen คาดว่า (จะเกิดขึ้น)

caught off guard - not expected, unexpected

hefty - very large ใหญ่
expected hefty losses

severe - very serious and worrying ที่รุนแรง ที่น่าเป็นห่วง
severe flooding

fees - money that you pay to be allowed to do something ค่าธรรมเนียม
international - ระหว่างประเทศ between countries
high fees charged by international adjusters.

foul - extremely unpleasant น่ารังเกียจ
local insurers are crying foul that their adjusters' fees are fixed at 2% of the loss amount while those charged by foreign insurers are based on an hourly rate. 

international practice
charged at a flat 2% of the loss amount

practice - a way of doing something done regularly การปฏิบัติ
capped - created an upper limit (no more than this value)
capped at US$50 billion

excess - greater than is usual; too much of something มากเกินปริมาณที่พอดี
fee - an amount of money that you pay to be allowed to do something ค่าธรรมเนียม, ค่าตอบแทน, ค่าบริการ
individual - relating to or involving a single, separate person or thing แต่ละบุคคล

For losses in excess of that, the fee is based on the working hours of the adjusters, which is anywhere from $50-210 an hour depending on the experience and position of individual adjusters.

estimates - guesses of what the size, value, amount, cost, etc. of something might be การประมาณค่า
estimates flood losses

figure - an amount of money จำนวนเงิน
up to 90% of the figure has been reinsured.

advantage - a condition giving a greater chance of success ความได้เปรียบ
troubled - has problems
count - each crime someone is accused of คดี
process - a series of actions that you take in order to achieve a result แนวทางปฏิบัติ, กระบวน, วิธีการ

This is a double standard, taking advantage of troubled local insurers that must count on foreign reinsurers for the payout process

outspoken - giving your opinion strongly and honestly, even if other people do not like it พูดโผงผาง,พูดตรงไปตรงมา,พูดจาเปิดเผย
veteran - a person who has a lot of experience in a particular area or activity ผู้อาวุโส  มีประสบการณ์
outspoken industry veteran

charge different rates in the same market.

issue - a problem that needs to be considered; a subject that people discuss or argue about ประเด็น
raised the issue

talks - negotiations, formal discussions of problems between different sides in a conflict in order to solve the problem
talks with international adjusters

positive - good; hopeful and confident, or giving cause for hope and confidence ซึ่งมองในแง่ดี
positive response - people liked what they said or did
did not receive a positive response

capacity - a particular position or job; a responsility that a person has because they have some job or position
regulator - an official who makes certain that the companies who operate a system work effectively and fairly ผู้มีอำนาจควบคุม
in its capacity as regulator

negotiate - to talk with other people to make an agreement
negotiate with the international adjusters to base their fees on the international standard. 

counterparts - people or organisations with a similar function or position or function in different countries or organisations
competitiveness - how well a business can do compared to other firms (does it have lower price or higher quality?), how well a company is able to maintain or gain customers in a market การแข่งขัน

insurance claims will carry higher adjusters' fees by Thai firms than their foreign counterparts operating here, resulting in lower competitiveness for Thai insurers

widespread - happening or existing in many places, or affecting many people อย่างแพร่หลาย
risk - the possibility that something dangerous or unpleasant might happen ความเสี่ยง
coverage -
this year's widespread flooding will lead foreign reinsurers next year to more than double their pricing on flood and industrial all-risk (IAR) policies and reduce flood coverage limits.

sum - an amount of something, especially money จำนวนเงิน
the sum insured - the amount of damage that the insured business is protected against
the sum covered - same as "the sum insured"

Premiums on IAR policies that cover flood for industrial factories are now charged at only 0.01% to 0.03% of the sum insured with almost 100% of the sum covered. 

I believe premiums for IAR policies excluding flood will more than double, with flood coverage to be separated from IAR and charged at not less than 0.1%

crisis - an urgent, difficult or dangerous situation วิกฤตการณ์ วิกฤต
this year's crisis

flood coverage limits
the sum insured

natural - found in nature (not made in a factory by humans) ตามธรรมชาติ
natural disaster - a big natural event such as an earthquake, tsunami, storm or floods that damage property, injure and kill people (See Wikipedia)
natural catastrophe - Same as "natural disaster" 
natural calamities - Same as "natural disaster"

considered a risk for natural catastrophes

state - government รัฐ
the French state-owned reinsurer

write off - a situation where an asset loses almost all of its value, so its value in accounting records is reduced (written off) (example: the badly damaged car was a complete write off)

exposure - in a position where you might be harmed or suffer damage (not covered or protected from harm, runs a risk of being harmed)
written off its exposure

scale back - reduce, decrease
scaled back their exposure - reduced their exposure

select clients - only some customers (selected for good qualities)
focusing only on select local clients

in line with - agreeing with
in light of - because of

clients - (formal) customer ลูกค้า

anticipated - believe will happen, expected คาดว่าจะเกิดขึ้น
anticipated heavy losses

significant - large enough to be important or have an effect ที่สำคัญยิ่ง
funds - money available to spend on something เงินทุน
raise funds - get the money you need for a project or new business
funding - money given for a particular purpose การให้เงินสนับสนุน

shareholder - a person or company that owns stock shares in a company (making them part owner of that company)
shakeup - when major changes happen
major shareholder shakeup

joint - done together; belonging to or shared between two or more people ที่ร่วมกัน, ความร่วมมือกัน
joint venture - a business owned and operated by two or more other businesses
Thai-foreign joint ventures

capital - money invested in a business

contribution - paying part of the cost of something, here part of the capital or owner investment in a business การลงทุนห
foreign contribution - the amount of capital of a Thai business provided by a foreign investor

wipe out - destroying, eliminating
wiping out Thai shareholders who fail to find new funding to match the foreign capital contribution