Flood insurance, if govt shares risk

Govt involvement in home flood insurance as in US might be needed. Insurance Cos await flood management plans.

flooded home

In photo above houses and cars damaged by floodwaters at a housing estate in Pathum Thani, one of the residential areas hardest-hit by the floods, just north of Bangkok (Photo: Rattaseema Pongsan)

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INSURANCE: Government may need to share risk with insurers by Wichit Chantanusornsiri


The government may need to help share the risk with insurers to make flood insurance viable for homeowners if local insurance firms are reluctant to offer coverage in flooded areas or charge relatively high premiums.

Lawaron Saengsanit, deputy spokesman for the Fiscal Policy Office under the Finance Ministry, said the Office of the Insurance Commission (OIC) would hold internal discussions on the issue this week.

"Most insurers are afraid of providing flood coverage right now, so we need to consider a temporary scheme that features risk-sharing between insurance companies and the government," noting such a scheme would be similar to the models adopted in Japan, the US, Taiwan, New Zealand and Australia.

Mr Lawaron added local insurers need to negotiate with international reinsurers, as up to 90% of the insurance industry is reinsured to foreign firms, explaining how the government has promised to develop a water management system with flood models.

Several factories located in flooded industrial estates have reported reinsurers are waiting for clear water management plans from the government before renewing policies. But others have renewed coverage to factories in flooded estates, albeit at higher premiums.

Flood coverage in Thailand used to be practically free for clients who bought fire insurance to protect property, with premiums of only 0.1-0.2% of the sum insured.

Surachai Sirivallop, chief executive of Thai Reinsurance Plc, said the so-called insurance pool to cover SMEs and residences is viable given the relatively small sums insured - the maximum amount an insurance company will pay out in the event of a claim - in the two sectors.

But he questioned the viability of insurance pooling for the industrial sector given its massive cost. Sums insured for industrial all-risk coverage in Thailand are valued at up to 10 trillion baht.

The cabinet yesterday urged insurers to pay companies and households affected by flooding within six months.

The Office of Insurance Commission estimated as of Dec 6 that insurers would pay out 262 billion baht, with 228 billion going to 926 factories and the rest to households.

(Source: Bangkok, INSURANCE, Government may need to share risk with insurers, 14/12/2011, Wichit Chantanusornsiri, link)

Insurance Insurance Industry Vocabulary

flood insurance - insurance coverage against property loss from flooding: "insurers in the US do not provide flood insurance coverage due to the hazard of flood typically being confined to a few areas. As a result, it is an unacceptable risk due to the inability to spread the risk on a wide enough population to absorb the potential catastrophic nature of the hazard. In response to this, the federal government created the National Flood Insurance Program in 1968" (See Wikipedia)

National Flood Insurance Program in US -
a US government program that enables property owners in participating communities to purchase insurance protection from the government against losses from flooding: "Participation in the NFIP is based on an agreement between local communities and the federal government which states that if a community will adopt and enforce a floodplain management ordinance to reduce future flood risks ... the federal government will make flood insurance available within the community as a financial protection against flood losses" (See Wikipedia)

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) การประกันภัย
insurer - a company that sells insurance policies to companies and individuals as a business
insurance policy - the contract between the insurance company that sells insurance and the person with the insurance (policyholder) (See Wikipedia)

insurance premium -
the amount charged for an insurance policy (the "insurance coverage" in the policy) 
sum
- an amount of something, especially money จำนวนเงิน
the sum insured - the value of loss or damage that the insurance covers
premiums of only 0.1-0.2% of the sum insured

relatively - compared to other things
relatively high -
high compared to other things
relatively high premiums -
premiums that are high compared to other premiums 
charge relatively high premiums

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 policy X covers Y and Z - if bad events Y or Z happen (flood, earthquake, tsunami, etc) then the insurance policy will pay money

flood coverage - flood damage and loss that is paid for by an insurance policy
most insurers are afraid of providing flood coverage right now

clients - (formal) customer ลูกค้า
flood coverage used to be practically free for clients who bought fire insurance to protect property

reluctant - do not want to do something (so are slow, hesitate, or do without enthusiasm) ลังเลใจ ไม่เต็มใจ
local insurance firms are reluctant to offer coverage in flooded areas

industrial all-risk coverage (IAL) -

renew - start again, extend the period, add more time to something 
renew policy - start the insurance policy again (sign a new contract for another year, for example)
renew coverage - same as "renew policy"

albeit - although, though
renewed coverage to factories in flooded estates, albeit at higher premiums

insurance claim -
a request to your insurance company for an amount of money to be paid for loss or damage for which you are insured
insurance payouts - the amount of money paid by the insurance company for damage to a person who has insurance

in the event of a claim - if a claim happens
maximum - the most possible ที่สูงสุด ที่มากที่สุด
the maximum amount an insurance company will pay out in the event of a claim

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

share - to have or use something at the same time as someone else ใช้ร่วมกัน
risk - danger, how likely or possible it is for a bad event that causes harm and damage ความเสี่ยง
share the risk -
face possible loss together with others (for example: a group of insurance companies insuring a risk, rather than just one)
share the risk with insurers

viable - will be successful and not fail; able to work as intended or able to succeed ซึ่งใช้การได้ (แผนการ, คำแนะนำ) ซึ่งประสบผลสำเร็จได้
make flood insurance viable

pool - a group or set of people or things available for use
insurance pool - when a group of insurers join together to insure something and share risk
so-called -
called, generally called this by people
residences - homes, places that people live at  
the
so-called insurance pool to cover SMEs and residences is viable

viability - can continue successfully, remain alive
questioned the viability of insurance pooling

the government may need to help share the risk with insurers to make flood insurance viable for homeowners

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" (See Wikipedia)

clear
- easy to understand
clear water management plans
reinsurers are waiting for clear water management plans from the government before renewing policies
up to 90% of the insurance industry is reinsured to foreign firms

negotiate - to successfully travel on a road or path that is difficult to travel on or through ฝ่าไป
international - ระหว่างประเทศ between countries
local insurers need to
negotiate with international reinsurers

deputy - a person who is given the power to do something instead of another person, or the person whose rank is immediately below that of the leader of an organisation รอง, ตัวแทน,ผู้รักษาการแทน
spokesman - an official person who provides information about an organization to the public and media in press conferences โฆษก
deputy spokesman

internal - existing or happening inside a person, object, organisation, place or country ภายใน
internal discussions - having discussions about some issue between people or departments inside an organization
issue - matter; a subject that people discuss or argue about; a problem that needs to be considered ประเด็น
hold discussions - have discussions on some topic or subject
hold
internal discussions on the issue

temporary - done or used for only a limited period of time, i.e., not permanent ชั่วคราว
scheme - a plan that is developed by a government or large organisation in order to provide a particular service for people แผนการ โครงการ
temporary scheme - a plan to provice a service to people for a short and limited time

a temporary scheme that features risk-sharing between insurance companies and the government

models - a system, a simple description of how a system works (to help you understand it) 
similar to the models adopted in Japan, the US, Taiwan, New Zealand and Australia.

executive - the highest level managers in a company

sector
- a part of the economy ภาคเศรษฐกิจของประเทศ (public sector = government, private sector = all businesses, household sector = families and consumers, banking sector,...) (See Wikipedia)
industrial sector - all the companies the produce or manufacture goods in the economy

massive - very large in size, amount or numberใหญ่โต มหาศาล
massive cost - very high cost, costs a lot, very expensive 

urged - requested them to do, advised someone very strongly about what action should be taken วิงวอน
households - families or groups of people living together (economics treats this as a unit that makes decisions)

the cabinet yesterday urged insurers to pay companies and households affected by flooding within six months

About the author

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Writer: Jon Fernquest
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