Net Impact Talk 17 Nov 2011

1. Governance : Limits Of Director Liability
17 November 2011
The Sasin Centre for Sustainability Management and Net Impact
Bangkok Professional Chapter
www.thailand-insurance.netwww.thailand-insurance.net

2. 30 November 2012
Thai Floods
Iris Lai
Source: BestWire Services
Date: November 10, 2011
Thailand's ongoing flood disaster is expected to trigger significant commercial and business interruption
losses to manufacturing and supply chains in global markets as major industrial parks have been submerged
and production suspended for many international automobile and computer producers.
"The long-term economic impact of this event is set to be far-reaching and no reliable estimates can yet be
made as to the impact the flooding will have on the global economy," said risk modeler AIR Worldwide in a
statement.
Damage claims from the floods are expected to exceed 600 billion baht (US$19.5 billion), including actual
damages and losses due to suspended business, according to Thailand's Office of Insurance Commission.
The greatest damages are in seven industry "estates," with estimated insured losses of 457 billion baht.
As the country, as well as Bangkok, is still dealing with floods, Thailand's General Insurance Association said
it "can't make any estimation for insurance losses and impact" at this point.
Insurance Australia Group Ltd. said the flooding event will cost it an estimated A$50 million (US$51.4 million)
in net claims. This estimate assumes the remaining protection available under the group's aggregate
Thailand Flooding Expected to
Trigger Business Interruption
Losses in Global Markets
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3. 30 November 2012
Thai Floods
• Early days – losses not settled
• Initial estimates high: USD $15bn – USD $20bn
• Estimates including Business Interruption (usually 60 day waiting period)
• Claims mainly across Motor Vehicles & Property All Risk (IAR)
• Japanese insurers estimated 50% to 60% of loss
• Corrective local rate increases expected 20% - 400%
• Sub-Limited Flood cover , higher rate & deductible – case by case
• Market studies & data collection underway by Dhipaya

4. 30 November 2012
Catastrophe Insurance Market
Significant,
Unprecedented
Global Losses
USD $30bn +
USD $12bn +
2005
American
Hurricanes +
associated
Flooding USD 45bn.

5. 30 November 2012
Catastrophe Insurance Market
Losses not fully insured …variable insurance penetration
November 2011 - “Asia-Pacific accounts for 80% of natural catastrpohe losses this
year….Insurance density remains very low in many countries of the Asia Pacific region,”
Munich Re says. “On average, only 6% of natural catastrophe losses were insured over the last 30
years.” It calculates economic losses this year at $US259 billion ($250 billion) – of which only
$US52 billion ($50 billion) was insured.

6. 30 November 2012
Catastrophe Insurance Market
Losses well
spread …

7. 30 November 2012
Catastrophe Insurance Market
And major reinsurers well reserved ….

8. 30 November 2012
Catastrophe Insurance Market
18 months Global catastrophes have not moved market rates to date – surplus capacity ,
over-supply
ROL – Rates on Limit (ROL) offered - flat at June 2011, and trending DOWN since
2006 – AFTER Katrina.

9. 30 November 2012
Soft Market Headlines
“The Rate Debate: Japan Quake Alone Not Enough To Harden Market” 16.3.11
“Insurance, reinsurance rates remain soft”: Nov. 09, 2010 9:43 AM CENTRAL
Jardine Lloyd Thompson Group P.L.C. said insurance and reinsurance rates remain soft in most
classes in which the brokerage operates, with the exception of offshore energy business.
“Worldwide Insured Cat Losses Nearly Double In 2010”
December 16, 2010

10. 30 November 2012
Insurance Market Trends
Endless cycle – short term memory , opportunistic capital inflows and competition

11. 30 November 2012
Flood Impact to Governance & Directors
• Destroyed / damaged company or balance sheet = shareholder or receiver
actions
• Board Insurance Policy (D&O Liability) may have exclusions for
• Failure To Insure
• Bodily Injury & Property Damage
• Willful Breach of Regulations & Law
• Pollution
• Lay-off’s result in Employment Practices Liability claims (EPL insurance)
• Failure to preserve & protect key business assets = negligent management
• D&O insurer may or may not be obligated to advance legal defence costs.

12. C H U B B
Directors’ and Officers’
Liability Insurance
Understand Exposures
CHUBB INSURANCE CO., (THAILAND) LTD.
Chubb Specialty Insurance Department

13. C H U B B
Why do we need D&O Insurance?
 As directors of the company, there are several duties and liabilities
imposed under various provisions of the law.
 Duties can be found under common law, civil law and statutes.
Statutes such as the Companies Act imposed on directors the duty
to act with care and skill.
 If directors are held to be personally liable, they would have to
defend and pay the damages on their own.
• Protects the cover for innocent D&Os – who may become collateral
damage.

14. C H U B B

15. C H U B B

16. C H U B B D&O Trend in Thai market
• D&O Claims continued to increase since 2007,
such as EPL Claim (based on our record)
• Local Regulation – Draft Law on Class Action Bill
that the cabinet was approved on 9 November
2010
• Listed companies on the Stock Exchange of
Thailand (SET) - Good Corporate Governance

17. 30 November 2012
Thank You
CHUBB INSURANCE CO.,
(THAILAND) LTD.
Chubb Specialty Insurance
Department

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