Thai insurers are reassessing their disaster coverage and are likely to stop offering free earthquake coverage following the 7.7 magnitude earthquake that struck Myanmar and shook Thailand last Friday, according to the Thai General Insurance Association.
The earthquake caused destruction in both countries and led to the collapse of the 30-storey State Audit Office building, which was under construction in Bangkok’s Chatuchak district. The building’s collapse resulted in at least 13 deaths and left approximately 75 workers trapped beneath the rubble.
The TGIA said on Tuesday that insurers will stop offering free earthquake coverage and are likely to separate earthquake insurance from fire insurance policies, reported the Bangkok Post.
“Thailand has never experienced such a strong earthquake as the one that rocked the country last Friday,” said TGIA president Somporn Suebthawilkul. “As a result, insurers are reassessing their risk exposure and pricing models for natural disaster coverage.”
Previously, earthquake and flood cover have been bundled with fire insurance policies for residential and commercial buildings to encourage uptake. With rising disaster frequency and severity, this approach is expected to end.
Myrto Papaspiliou, Head of International Catastrophe Model Research at Howden Re, explained that while only 10 of Thailand’s 76 provinces are classified as earthquake risk zones, Bangkok’s soft alluvial soil amplifies shaking, making the city vulnerable to large, distant earthquakes.
“In comparison to primary perils such as typhoons and floods, earthquake risk in Thailand is considered comparatively low, although earthquake models for the region indicate that they are not unlikely,” said Souter.
Somporn suggested introducing standalone earthquake insurance policies, increasing disaster insurance premiums, and adjusting deductible rates as potential measures.
For projects not yet under construction, insurers should evaluate risks more rigorously, considering factors such as the construction company’s qualifications, Somporn suggested. For completed high-rise buildings in use, insurers will consider building usage and occupant profiles to ensure a more cautious risk assessment approach.
“The damage from this earthquake serves as a crucial lesson. Currently, all relevant parties are assessing the impact on insured customers, a process that will take time,” he added.
The State Audit Office is understood to have been insured under a Contractor All Risk (CAR) policy with a total sum insured of 2.24bn baht (US$65m), with four insurers sharing the coverage: Dhipaya Insurance (40%), Bangkok Insurance (25%), Southeast Insurance (now Indra Insurance) (25%), and Viriyah Insurance (10%).
Based on its construction progress, losses are estimated to exceed one billion baht (US$29m).
