Local insurers should set up a pooled fund to provide terrorism coverage, particularly for retail clients, says Chai Sophonpanich, chairman of Bangkok Insurance.
Most foreign reinsurers baulk at providing reinsurance for Thai firms due to the recent political violence, he said.
''We, the Thai insurers, should co-operate by providing terrorism insurance through a pooled fund to offer coverage for the Thai businesses,'' said Mr Chai.
The pooled fund would target mainly small retail clients with sums insured worth about 5-20 million baht.
At least 15 local insurers would contribute to the initiative, led by Thai Reinsurance because of its expertise.
A key sticking point is how to calculate premium pricing for terrorism coverage, he said.
The Office of the Insurance Commission set a premium rate for terrorism insurance at 0.17% to 5% of the sums insured. Rates in excess of 5% need approval from the insurance commissioner.
Mr Chai said local terrorism coverage premiums charged by international reinsurers were expected to surge to around 5% because of the recent unrest.
Surachai Sirivallop, chief executive of Thai Reinsurance, said the recent riots and widespread arson caught foreign reinsurers off-guard when quoting prices, as this level of destruction had not taken place before in Thailand.
Premiums for terrorism more than five years ago were almost zero or coverage was free in addition to basic insurance policies for fire and property damage.
Terrorism insurance emerged locally about six years ago.
Unrest in Thailand's restive southern border provinces led Thai Reinsurance, through its partnership with Bangkok Insurance, to develop terrorism coverage for both individuals and property in addition to personal accident and property policies.
Premium for terrorism coverage were then about 0.5% of the sum insured.
The recent political violence resulted in premiums for terrorism coverage for Bangkok retailers increasing to about 1% of the sum insured, compared with just 0.2% in 2008.
International firms were said to have increased their rates for terrorism coverage in Thailand to as much as 2%, compared with a global average of about 1%.
Bangkok Insurance and Thai Reinsurance can cover insured sums up to 50 million baht. Sums beyond that amount would be subject to negotiation and ceded to foreign insurers.
''The climate has changed, and the risk has changed,'' said Mr Surachai.
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