Thai life insurers' credit profiles can benefit from paying more attention to the quality of their revenue sources, particularly those companies operating in a challenging environment, Fitch Ratings says. Intense competition in some product lines is looming in Thailand's life insurance industry, which Fitch believes will put pressure on profitability.
Some leading life insurers recently made the strategic shift to focus more on their earning quality. This action aligns with Fitch's opinion that concentrating more on sustainable revenue quality can help the companies' credit profiles amid a low-yielding environment and a more stringent regulatory landscape.
Growth of the Thai life insurance industry used to be propelled by sales of single-premium products and large-ticket, savings-type insurance plans. Some leading domestic life insurers have already started to amend their product offerings, after expecting hurdles triggered by associated risks and the industry's new accounting practices. The companies now focus more on protection lines, which provide a healthier profit margin and stable premium revenue.
Thai Life Assurance Association estimates the country's life premiums will grow 3%-5% in 2019, a similar rate to the previous year. Major growth constraints for the industry include high household debt, a muted economy and a stricter regulatory environment. Premiums written from health and investment-linked insurance products are likely to expand further, at least in the medium-term, owing to strong consumer demand.
Local life insurers' investment portfolios appear to be stable in the short term, partly from the conservative investment practices and higher risk charges on risky invested assets imposed by the country's forthcoming capital regime. Thailand's second-phase risk-based capital framework is scheduled for implementation later in 2019.
The full report "Thailand Life Insurance Market Dashboard 2019" is available at www.fitchratings.com or by clicking the link in this media release.