Background and Development Challenges 

Under the Tripartite Agreement between UNDP, Insurance Development Forum (IDF ) and the German government, UNDP conducted the Country Diagnostic on Inclusive Insurance and Risk Finance for Thailand. This study sets the groundwork for UNDP’s growing work in inclusive insurance and risk finance in Thailand and aims to summarize the gaps and opportunities for collaboration with key stakeholders. Its scope includes a review of the underlying risks and hazards that impact the country’s development, the market conditions and enabling legal and institutional environment for inclusive insurance and risk finance, and the extent to which insurance is integrated into national development frameworks.

Progress against the Sustainable Development Goals is fragile and can be undermined and reversed by multifaceted sources of risks. The climate crisis has also foregrounded the vulnerability of countries and communities to disaster risks.  Thailand is cited in the 2021 Thailand’s Climate Risk Country Profile as one of the world’s ten most flood-affected countries and is ranked in the Germanwatch’s Global Climate Risk Report ninth on the list of the top ten countries most affected by weather-related loss events. These planetary pressures contend with different threats to its development and risks to the country’s resilience building.

To manage disaster risks, the Thai government enacted the Disaster Prevention and Mitigation Act (DPM Act 2007) which sets out the main statutory framework for disaster risk management and disaster response and is supported by the National Disaster Prevention and Mitigation Plan (2015-2020) and provincial and district disaster risk management plans. The Fiscal Policy Office (FPO) is responsible for fiscal risk management, including analyzing the impact of the changes in macroeconomic variables, including the impacts of natural disasters on Thai economy and government’s fiscal balance, tracking fiscal early warning system, and estimating foregone revenues from disasters.

Notwithstanding the above framework and the existing risk assessment and management, Thailand is still ranked only 39th out of 48 countries in Germanwatch’s 2021 Global Climate Risk Index report in terms of its capacity to handle natural disasters. Disaster risks are not yet systematically accounted for in budget formulation, and in terms of inclusivity, Thailand shows low insurance penetration and density both in the life and non-life insurance markets. It is crucial, therefore, that pathways to sustainability are risk-informed and that greater attention is given to how risk management is financed.            

The transformation toward building resilience is needed for countries like Thailand given the increasing complexity of the looming challenges, from the COVID-19 pandemic to global geopolitical conflicts and risks associated with climate change and natural disasters, which could hinder the delivery of socio-economic services to the poor and vulnerable as well as the country’s progress towards the Sustainable Development Goals (SDGs). Embedding insurance and risk finance into broader risk management frameworks will contribute to Thailand’s resilience-building.