Two insurers of Thailand's richest man sought liquidation over Covid policies

Southeast Insurance Co and Thai Insurance Plc, controlled by Thailand's richest man Charoen Sirivadhanabhakdi through Thai Group Holdings, sought in January 2022 to cease operations of their non-life divisions, saying they could no longer cover mounting Covid-19 claim costs. Local insurers had started selling Covid-19 infection policies in 2020, when fear outpaced the infection rate: typically up to 50,000 baht paid to anyone who caught the virus, for premiums as low as 300 baht. The policies were considered a novelty and even a status symbol.

It was the April 2021 Delta wave that broke the model: cases and hospitalisations surged, and by February 2022 Thailand's daily caseload hit 21,232, the highest since the Delta peak. Thai General Insurance Association president Anon Vangvasu admitted: "We have underestimated the exposure risk of the virus mutations and new infectious variants." Thais held about 8 million Covid policies — down from a peak of 15 million as insurers suspended issuance — almost all expiring by June 2022.

The damage ran deep: Southeast Insurance paid about 8.1 billion baht in virus claims, and Thai Group Holdings swung to a 269 million baht net loss in the first nine months of 2021. Its shares tumbled more than 40% in a year, wiping out over $400 million in market value. Rival Syn Mun Kong posted a 3.85 billion baht nine-month loss, the worst among listed insurers. The Office of Insurance Commission said the two Charoen insurers must keep honouring claims until a panel decided on their petitions.

The product priced infection risk at pre-Delta rates: a 300-baht premium against a 50,000-baht payout cannot survive a variant that infects tens of thousands a day.

The policies sold as a status symbol grew to 15 million nationwide, concentrating variant risk across the whole industry at once.

Issuance was suspended only after large compensation payments had already begun, locking in the loss-making book.

Management itself conceded it had underestimated mutation risk — the exposure was knowable, the pricing just never updated.

Underwriting a novelty product against an unknown tail is not marketing savvy: price the variant risk or the premium is a donation with your name on it.

The liquidation petitions remained under regulatory assessment as of February 2022, with the two insurers ordered to keep operating and honouring claims meanwhile. Finance Minister Arkhom Termpittayapaisith assured the public that a stress test showed most Thai insurers could cope, and that the industry had sufficient capital. For Charoen — No. 120 on the Bloomberg Billionaires Index — it was his second financial-sector trauma after First Bangkok City Bank was seized by the government in the 1998 Asian crisis.