The controlling shareholders of Syn Mun Kong Insurance are exploring the sale of a majority stake in the insurer and have picked several strategic players to advance into the next round of bidding, reported Bloomberg citing people familiar with the matter.
The insurer is raising funds to improve its liquidity position in order to pay COVID-19 claims that have surged.
Syn Mun Kong is working with an adviser on the deal, which could be valued at about $200m, they said. The sale could include a fresh investment of about $100m, they added.
The Dusdeesurapot family led by chairman Reungvit Dusdeesurapot owned a 36% stake in the general insurer as of 27 May 2020, the company's annual report shows. The family held another 25% via Dusdeesurapot Holding Co.
Syn Mun Kong is one of three general insurers which have received the approval of the Office of Insurance Commission (OIC) to implement liquidity enhancement measures to improve their liquidity so as to be able to pay outstanding COVID insurance claims. The grace period is from 30 September 2021 to 30 June 2022. The other insurers are Thai Insurance and The One Insurance Public Company.
Over at One Insurance, shareholders at an extraordinary general meeting yesterday did not agree to an increase of THB2bn in the capital of the insurer. The shareholders are reluctant to pump in money especially because of fears of a new wave of COVID-19 infections. The Omicron variant of the coronavirus is also a concern. The insurer could lose its operating licence if it were to fail to correct its capital position to meet COVID claims.
Meanwhile, Thai Insurance plans to stop accepting new business in the first quarter of 2022 so as to avoid conflict of interests within the Thai Group Holdings stable following a sale of a stake in the insurer to a company within the group, according to a statement lodged with the Thai bourse.
The first insurer that is a casualty of the COVID-19 crisis is Asia Insurance Company that was ordered in September 2021 by the OIC to suspend insurance sales.
Separately, several insurers that have sold COVID-19 insurance policies are hoping that the OIC would allow them to revoke the policies. At least 10 of the insurers are listed on the Stock Exchange of Thailand, reported Nikkei Asia. They have reported a combined THB5.8bn loss for the third quarter through September. The insurance regulator had already in July this year rejected such a request. However, the OIC allows insurers to alter insurance coverage on a case-by-case basis if customers agree to the change.
Scale of claims
Thai General Insurance Association (TGIA) president Mr Anon Vangvasu has said that cumulative claims from the sale of COVID-19 policies since last year could reach THB40bn by the end of this year or 30% on average of their risk-based capital prepared for all types of general insurance. As of 15 November, he said, COVID-19 claims exceeded THB37bn while insurers’ risk-based capital stood at THB132bn, reported The Bangkok Post.
Mr Anon added the percentage could reach an unsustainable level of 60%-70% in the event of a new wave. If that happens, 70m policies of other types of general insurance could be affected. He thus urged the OIC to allow insurers to cancel the COVID-19 policies.
He says that COVID-19 is an emerging risk, with little data to support the accurate calculation of coverage and claims. Pricing was initially based on available data at the time.