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According to the government, the measures are multi-pronged. Aside from helping to rein in the surging Thai baht, the new measures will be used to further diversify the investments of the domestic insurance market, which has experienced fairly flat returns in the past two years.
The new measures will be restricted mainly to offshore bonds and debentures, which Thai insurers already have substantial investment experience in. From there, the commerce ministry will also encourage Thai insurers to invest in unit trusts domiciled in large and liquid international markets. The government did not specify, however, which markets these would be.
The ministry is already projecting that by increasing the offshore investment limit available to insurers to 8.5% that an additional 12 billion baht (approximately $410 million) will head offshore. Currently, Thai insurers, both life and non-life firms, invest roughly 44 billion baht ($1.5 billion) of their collective assets outside of the Kingdom.
As of December 2006, the total investable assets of the Thai life insurance industry stood at 664.123 billion baht, while the non-life business had around 93.017 billion baht to play with. Going on these numbers, the industry is not hitting its available quota for offshore investment, which according to the Thai Life Insurance Association, is a result of low international bond yields.
Prior to investing in more offshore assets, insurers in Thailand will require approval from ThailandÆs insurance department. The move also comes as the countryÆs Securities and Exchange Commission (SEC) is preparing to ask the Bank of Thailand to increase the combined limit for offshore investment by local institutional investors from US$6.8 billion to $10 billion.
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