The insurance industry could outstrip the Thai economy in terms of growth this year, thanks mainly to health and auto policies, as there are headwinds that could pose risks to the country's GDP outlook, leading insurance executives say.
The near-term forecast for Thailand's gross domestic product (GDP) growth remains stable at 3.2% this year, up from 2.5% in 2023. However, there are a few developments which might present headwinds for achieving this forecast, potentially leading to lower growth, said Thomas Wilson, president and chief executive of Allianz Ayudhya Assurance.
"First, the United States' Federal Reserve is unlikely to reverse its high interest rate policy until the second half of 2024. These developments may lead to a delay in interest rate cuts by the Bank of Thailand in the near term to the extent to which it follows the Fed," he told the Bangkok Post.
Despite 11 increases in the US key policy rate since March 2022 in an effort to combat inflation, the Fed has failed to dampen wage inflation with strong new job and GDP growth rates, driven by consumption and business investment, Mr Wilson added.
Meanwhile, the Chinese economy is "proving to be less resilient". Although China's economic growth was in line with its 5%+ goal in 2023, the International Monetary Fund expects it to lose steam in 2024, dropping to as low as 3.4% in 2028, due to significant challenges in its property sector, local government debt levels, weak domestic demand and consumer confidence, he said.
"The potential challenge to China's potential export growth engines is electric vehicles, battery and solar power industries due to potential actions by the US and Europe against the Chinese subsidy-driven industrial policy, with a further challenge in the medium term potentially coming from emerging hydrogen fuel cell technologies," he said.
In addition, Donald Trump's lead in the US Republican primary race may accelerate the challenges in China to the extent to which further tariffs are imposed. However, the more significant effects are likely to be in the area of geopolitics and the conflicts in Ukraine, the Middle East and across the Taiwan Strait, he added.
"Broadly speaking, the Thai property and casualty insurance market is likely to grow slightly faster than GDP as vehicle sales recover and the price for property insurance, especially natural disaster insurance, continues to harden," Mr Wilson noted.
"Similarly, it's realistic to expect continued strong sales for health insurance outstripping GDP growth due to the heightened awareness of the Thai consumer and high medical inflation."
Claude Seigne, chief executive of AXA Thailand General Insurance, said the non-life insurance industry in Thailand is poised for continued growth, driven by several factors including technological advancements and changing consumer risk perception.
"EVs are at the forefront of this transformation for the coming years and the sector is expected to significantly contribute to the growth of the motor insurance sector," he said.