The Office of the Insurance Commission (OIC) is moving forward with its forward-looking supervision initiative by launching the “CAT Scenarios Project,” a disaster simulation program to assess the impact on the insurance business through stress testing. This aims to strengthen the readiness of the Thai insurance system to cope with potential future large-scale disasters.

Dr. Ayusri Kambharnlue, Assistant Secretary-General for Standards Development, revealed that the world is currently facing increased risks from natural disasters, which are becoming more frequent and severe due to climate change. These directly impact the insurance sector and overall economic stability. The OIC recognizes the importance of developing regulatory tools to assess risks in a forward-looking manner, enabling effective preparation for potential future severe events.

The CAT Scenarios Stress Test project aims to develop an industry-wide stress test framework for assessing the impact of natural disasters. It designs simulations tailored to Thailand's context and risk profile, considering factors such as geographical location, disaster characteristics, and severity, to analyze the impact on financial stability and underwriting capacity. This project aims to improve the stability of the Thai insurance system as a whole. The CAT Scenarios Stress Test will provide in-depth insights into the impacts of complex simulated events, reflecting real-world risks more accurately. It will also enable a comprehensive analysis of the impact on financial position, liquidity, and recovery strategies under crisis conditions.

Furthermore, industry-level assessments using a common scenario will allow for systemic risk analysis and a clearer view of the vulnerability of the Thai insurance system. The project is divided into four phases: studying international best practices and developing a testing framework for Thailand; designing simulation scenarios and damage assessment tools; conducting tests with insurance companies; and analyzing results to provide policy recommendations. It is expected to be completed by December 2026.

The testing will cover three main scenarios: a 1-in-200-year magnitude flood, a 1-in-200-year magnitude earthquake, and a scenario where both a flood and an earthquake occur within the same year at a magnitude of 1-in-100 years. The impact on the insurance business will be assessed over a three-year period, reflecting both short-term and long-term effects. The Long-Term Recovery Path

The Office of Insurance Commission (OIC) expects that the project's outcomes will enhance knowledge of disaster risk management in both the business sector and regulatory agencies, support the development of proactive regulatory tools, and strengthen the stability and sustainability of the Thai insurance system. This will enable the system to effectively address the challenges and risks of potential large-scale disasters in the future.

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