Thailand's insurance regulator, the Office of the Insurance Commission (OIC), announced that this year, it will be using a Top-Down Scenario approach to assess the systemic impact of various events, as part of the framework for conducting the 2026 OIC Stress Test for life and non-life insurance companies.
According to a statement from the OIC, this test aims to assess the insurance industry’s ability to withstand risks under severe simulated scenarios that may impact the country’s financial stability.
This year, the OIC is placing particular emphasis on geopolitical risk, especially the tense situation in the Middle East.
The ongoing conflict is “likely to lead to continuously rising global energy prices, uncertainty regarding energy security and disruptions to international supply chains, resulting in increased production costs across various industries”, the statement said.
“Simultaneously, global economic activity and investment are projected to slow significantly,” the statement added.
“These impacts affect the Thai economy in several ways, including higher commodity and energy prices, a slowdown in tourism and exports, volatility in financial markets and a decline in asset values.”
All of these factors could affect the financial position, investment and performance of insurance companies, the statement continued.
The OIC defined an adverse scenario as one that reflects an economic recession, which encompasses assumptions of declining per capita income, high inflation rates, a slowdown in the tourism and export sectors and the impacts of climate change that may increase health risks and natural disasters.
“This results in a continuous increase in the insurance claims burden, while simultaneously weakening the debt repayment capacity of households and businesses, leading to tighter credit conditions and liquidity risks in the system,” the statement said.
OIC Assistant Secretary-General for Standards Development Dr Ayusri Khambharnlue concluded in the statement, “The main goal of conducting stress tests is to strengthen the Thai insurance system, enabling it to effectively withstand risks from global economic uncertainties and geopolitical factors, as well as build long-term confidence.”