Thailand's total non-life insurance premiums grew by 4% in the first quarter of 2018, propelled by the motor and personal accident segments, says Fitch Ratings.
Fitch expects premium growth to continue, supported by benign economic conditions, government stimulus for investment and strong new-car sales.
The Thailand General Insurance Association has forecast premium growth of 3-5% for the whole of 2018.
Fitch said higher local car sales, which jumped 13% in 2017, could heat up competition among motor insurers.
But the motor segment's loss ratio deteriorated to nearly 68% in the first quarter this year, up from 64% in 2017, due to inflated claims and high repair costs.
Prudent product pricing that reflects inherited risks and the maintenance of efficient operations to preserve business profitability should prevent further ratio deterioration, Fitch said.
The contribution from health insurance products to total industry premiums rose by 40% during 2013-17 to reach 5% of market share by total premiums at the end of the first quarter.
In Fitch's view, there is room for expansion because Thailand's health insurance penetration was below 1% in 2017 and its population is ageing at one of the fastest rates in the region.
Premium contribution from the marine, industrial and property segments is also likely to rise in the near term, following increased public and private investment and international trade.
The non-life insurance market retains a reasonable buffer, with average risk-based capitalisation of 307% at the end of the first quarter of this year, above the 140% regulatory minimum.
Investment assets are stable and liquid, resulting in a sound capacity to withstand volatility and meet obligations, Fitch said.
Pricing competition is likely to ramp up as insurers chase higher demand in light of the improving economy and rising new-car sales.
Like its neighbours, Thailand is deregulating premiums for basic products, such as travel and motor insurance. This requires increased discipline from local insurers to maintain healthy financial positions.
Local regulators are encouraging amalgamations in a bid to create more competent insurers with solid capital.
Fitch expects revised market rankings by total premiums after ongoing deals are completed. Startups have also introduced new motor insurance products from the regulator's innovation framework, which could motivate incumbents to operate more efficiently and scale up innovation.
The second phase of the risk-based capital framework, scheduled for 2019, could pressure non-life insurers' capitalisation due to higher risk charges; but most insurers should be able to maintain their capital ratios above the regulatory minimum, according to the regulator's studies.