OBSERVATION OF RISK-BASED CAPITAL
FOR DEVELOPMENT OF
SOLVENCY MARGIN OF THAILAND
.
Tommy Pichet, B.Eng (Hons), FSA, FSAT, MScFE (Distinction)
The Society of Actuaries of Thailand
36/1 Rama 4 Road, Bangkok 10120, Thailand
Proceedings of the East Asia Actuarial Conference
October 9-12, 2007 at Tokyo, Japan
Abstract. Solvency margin of Thailand has been using maximum of 2 percent of statutory reserve or 50 million baht (whichever is higher) as a required capital in order to absorb unexpected large loss for the sake of solvency in Life insurance industry while modified net level premium has been adopted to establish statutory reserve. Investment securities and market environment tend to be more complicated, simple and traditional monitoring may not be able to guarantee solvency of Life Insurance Company in future. As such, Thai regulator recently has planned to develop new solvency margin for Thailand by using risk-based capital concept to implement in Life insurance Company, which is operating in Thailand.
As a part of The Society of Actuaries of Thailand, this paper tends to assist Thai regulators to observe risk-based capital model as well as its history and development in Life insurance industry. Risk-based capital models developed from various countries during past several years are also observed as a stable benchmark. With author opinion to provide advantage and disadvantage from each model, it also recommends what can be holistically achieved and positioning for upcoming development of new risk-based capital of Thailand so as to encourage well risk management practice while having effective model but not too complicated to implement by Life insurance industry in Thailand.
Key-words: capital, solvency, risk-based capit ...