BANGKOK -- At least four Thai insurance companies have gone bankrupt after suffering losses from selling low-cost COVID-19 policies, raising fears of a domino effect that could weigh on the country's non-life insurance sector.
Syn Mun Kong Insurance is looking to raise capital and find new partners to stay afloat as it navigates a court-supervised rehabilitation. "Some foreign investors have expressed interest in joining us. We are in talks," said a source close to deals that could affect Syn Mun Kong's ability to retain its business license.
The insurer, listed on the Stock Exchange of Thailand, filed a rehabilitation petition to the Central Bankruptcy Court in May after facing huge losses from claims covered by its COVID-19 policies. The Office of Insurance Commission has warned it might revoke the company's non-life insurer license as liabilities have risen above assets.
COVID-19 outbreaks have plagued the insurance industry across Asia. Japanese short-term insurer JustInCase stopped selling coronavirus insurance and slashed hospitalization payouts 90%. Several other Japanese insurance companies have stopped selling COVID policies or significantly raised the price of premiums. In Taiwan, the Financial Supervisory Commission warned in late May that the local insurance industry could face more than 41 billion Taiwanese dollars ($1.3 billion) in COVID claims.
Syn Mun Kong is the latest Thai insurer to enter rehabilitation. Prior to its collapse, three other companies had already folded due to COVID-19 payouts: Asia Insurance 1950 Public Company, The One Insurance Public Company and Southeast Asia Insurance.
Syn Mun Kong was one of 16 companies in Thailand that started selling low-cost COVID-19 policies in 2020, offering plans for only 300 baht to 500 baht per year, with payouts as high as 500,000 baht to COVID-19 patients.
At the time, Thailand was lauded for successfully controlling COVID-19, with daily cases hovering below 300. This encouraged insurers to offer low-cost COVID policies, confident that the number of new patients would be low.
But as the pandemic persisted, consumers flocked to COVID insurance, encouraging more companies to jump into the game and ultimately trigger a price war.
Thailand faced several COVID outbreaks, including the delta wave in April 2020 and omicron early this year, pushing new daily cases over 20,000 at one point and overwhelming insurers.
Cheap COVID-19 policies were also hit with scams. Facebook had numerous posts from people selling inhalers purportedly containing the coronavirus so that buyers could catch COVID-19 and cash in with claims to insurance companies.
Syn Mun Kong has been faced with 41.8 billion baht in COVID-19 claims but only took in 661 million baht from sales of COVID-19 policies.
Total COVID claims across Thailand's insurance industry are estimated at 140 billion baht, according to the Thai General Insurance Association, which comprises 54 non-life insurance companies.
Statistics from the TGIA showed that the 16 insurance companies that offered COVID policies were comparatively small, as none were listed among the country's top 10 insurers ranked by capital adequacy ratio.
After a deluge of claims, all 16 insurance companies stopped selling COVID policies in June 2021. But the policies last one year, meaning that some insurers will have to cover claims until the end of this month.
"The problem is likely to end by June this year when all policies expire, but I think it still has a negative impact on the non-life insurance business as a whole," said Anon Vangvasu, chairman of the TGIA.
"What happened over the past two years will dampen client confidence in the insurance business, and that makes it difficult for insurance companies to expand their customer base," he added.