AMB Country Risk Report Our Insight, Your Advantage.

August 24, 2016

Country Risk Tier Thailand

CRT-3 The Country Risk Tier (CRT) reflects A.M. Bests assessment of three
categories of risk: Economic, Political and Financial System Risk.

Thailand, a CRT-3 country, has a low level of economic risk

and moderate levels of political and financial system risk. A.M.
Best considers the majority of countries in Southeast Asia to be
categorized as CRT-3 or CRT-4. The exceptions are Micronesia and
Papua New Guinea, as CRT-5 countries and Singapore, the sole CRT-
1 country.

Very Very Very Over the past few years, the economy has grown below most other
High High High regional neighbor economies and Thailands own historical growth
record. The slower rate of growth can be attributed to increased
political instability and lower global demand. While the political
situation is largely stable under military rule, the continued delay of
High High High democratic elections and further uncertainty will constrain growth
prospects. GDP growth is forecasted at 3.0% for 2016, with future
growth expected in the range of 3.0 - 3.5% over the medium term.

Mod- Mod- Mod-

erate erate erate

Low Low Low

Russia

Very Very Very

Low Low Low Sakhalin

Kazakhstan nd
s
la
Is
Mongolia ril
Ku

Economic Political Financial Russia

Georgia Kyrgyzstan

Risk Risk System Armenia Azerbaijan

Uzbekistan

Turkmenistan
Tajikistan North Korea

Risk China
South
Korea Japan

Afghanistan
Iran

Kuwait
Pakistan Nepal
Bahrain Bhutan

Country Risk Tier 5 (CRT-5) Saudi Arabia Qatar

U.A.E.
Bangladesh
Taiwan

Very High Level of Country Risk Oman

India
Myanmar
Laos Hong Kong
Northern Mariana Islands

Macau

Thailand
Yemen Vietnam Philippines
Country Risk Tier 4 (CRT-4) Cambodia Guam

High Level of Country Risk

Dijbouti

Somalia
Sri Lanka
Palau
Brunei Federated States

Country Risk Tier 3 (CRT-3) Malaysia

Singapore
of Micronesia

Moderate Level of Country Risk Sumatra

Borneo

New Guinea
Seychelles
Indonesia
Country Risk Tier 2 (CRT-2) East Timor
Papua
New Guinea

Low Level of Country Risk Comoros Coral Sea

Islands

Country Risk Tier 1 (CRT-1) Madagascar

Mauritius

Very Low Level of Country Risk Reunion Australia New Caledonia

Copyright 2016 A.M. Best Company, Inc. and/or its affiliates. ALL RIGHTS RESERVED. No part of this report or document
may be distributed in any electronic form or by any means, or stored in a database or retrieval system, without the prior written permission of
A.M. Best. For additional details, refer to our Terms of Use available at A.M. Best website: www.ambest.com/terms.
AMB Country Risk Report Thailand

Vital Statistics 2015 Regional Summary: Southeast Asia

Nominal GDP USD bn 395.29 Southeast Asia largely consists of the countries
Population mil 68.8 located north of Australia, west of New
GDP Per Capita USD 5,742 Guinea, east of India and south of China.
Real GDP Growth % 2.8
Inflation Rate % -0.9 According to the World Bank, aggregate
Literacy Rate % 96.7 economic growth in the Association of
Urbanization % 50.4 Southeast Asian Nations (ASEAN) will
be roughly 4.9% by 2017. Growth will be
Dependency Ratio % 39.2
driven by higher global growth and an
Life Expectancy Years 74.4
increase in exports demanded, particularly
Median Age Years 36.7
from higher-income countries.
Insurance Statistics
The continued slowdown in the Chinese
The Office of Insurance
Insurance Regulator economy will persist to be a headwind
Commission
for the rest of the region as export
Premiums Written (Life) USD mil 14,619 demand declines and investment levels
Premiums Written (Non-Life) USD mil 7,063 stagnate. Additional headwinds include
Premiums Growth (2014 - 2015) % 6.3 continued lower commodity prices, the
potential for increased political instability,
Regional Comparison growing regional unrest, the potential for
Country Risk Tier U.S. monetary policy normalization and
Thailand CRT-3 potential exchange rate volatility.
Indonesia CRT-4
Malaysia CRT-3 Most countries are trying to implement
Philippines CRT-4 structural reforms in an effort to encourage
Singapore CRT-1 inclusive and sustainable development by
Vietnam CRT-4 boosting economic growth. Some of these
reforms include building and maintaining
Source: IMF, Axco, Swiss Re and A.M. Best
needed infrastructure, improving the
educational system and developing
strategies to improve the competitiveness of
small to medium enterprises.

Economic Risk: Low

Economic Growth Despite a high level of political turmoil,
8
Thailands economy has been resilient
Real GDP CPI Inflation due to developed infrastructure, an open
7
economy, a diversified export industry and
6 generally pro-business policies. However,
levels of foreign direct investment have
5
been negatively affected.
4

%
3
Traditionally, Thailands economy had been
based on agricultural exports; in recent
2
decades, the economy has transformed.
1 Current key economic drivers include the
0
industrial and service sectors.
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

-1
Low levels of inflation and weaker than
-2 expected growth has kept monetary policy
accommodative.
Source: IMF World Economic Outlook and A.M. Best

2
AMB Country Risk Report Thailand

Political Risk Summary Political Risk: Moderate

Score 1 (best) to 5 (worst) The military took control of the country
Thailand World Average
in May of 2014 and will likely remain in
International Transactions
Policy power through at least 2017. The country
5
continues to be divided between the
Legal System 4 Monetary Policy Red Shirts (supporters of former premier
Shinawatra) and the Yellow Shirts (pro-
3
royalist and supporters of the political and
2 military elite).
Regional Stability 1 Fiscal Policy
Democratic elections continue to be
0
postponed pending the completion of all
reform objectives, including the passage
of a new constitution in August 2016.
Social Stability Business Environment The delayed transition to civilian rule
has the potential to increase the risk of
violent protests. Military rule has led to a
Government Stability Labor Flexibility
crackdown on protests and curtailment of
the freedom of the media.
Source: A.M. Best

The monarchy in Thailand is highly

regarded and is viewed as a unifying
institution in the country. The current
monarch has served since 1946 and there
are concerns about his eventual succession.

There is an increasing concern regarding

terrorism in the country.

Financial System Risk: Moderate

Thailands insurance industry is regulated
by the Office of the Insurance Commission
GDP Per Capita and Population under the Ministry of Commerce.
for Selected Countries
60,000 300 To improve financial stability, the
GDP Per Capita Population
International Monetary Fund (IMF)
recommended efforts to strengthen the
50,000 250
supervision of financial institutions, foster
coordination among regulators, update the
40,000 200
macro prudential policy framework and
improve crisis prevention and resolution.
Additionally, the IMF is concerned
Millions
USD

30,000 150
about high levels of household debt and
interconnected financial conglomerates.
20,000 100
In 2015, inflation moved into negative
territory largely as a result of lower
10,000 50 commodity prices and weak demand,
undershooting the Bank of Thailands
inflation target band of 2.5% +/- 1.5%. In
0 0
Thailand Indonesia Malaysia Philippines Singapore Vietnam 2016, inflation is expected to return to
positive territory.
Source: IMF and A.M. Best

3
AMB Country Risk Report Thailand

GUIDE TO BESTS COUnTry rISk TIErS

A.M. Best defines country risk as the risk that country-specific factors could adversely affect the claims-paying ability of an insurer. Country risk is
evaluated and factored into all Bests Credit Ratings. Countries are placed into one of five tiers, ranging from CRT-1 (Country Risk Tier 1), denoting
a stable environment with the least amount of risk, to CRT-5 (Country Risk Tier 5) for countries that pose the most risk and, therefore, the greatest
challenge to an insurers financial stability, strength and performance.
A.M. Bests Country Risk Tiers are not credit ratings and are not directly comparable to a sovereign debt rating, which evaluates the ability and
willingness of a government to service its debt obligations.

Country risk Tiers

Country risk Tier Definition
Predictable and transparent legal environment, legal system and business infrastructure; sophisticated financial
CRT-1 system regulation with deep capital markets; mature insurance industry framework.
Predictable and transparent legal environment, legal system and business infrastructure; sufficient financial system
CRT-2 regulation; mature insurance industry framework.
Developing legal environment, legal system and business environment with developing capital markets; developing
CRT-3 insurance regulatory structure.
Relatively unpredictable and nontransparent political, legal and business environment with underdeveloped capital
CRT-4 markets; partially to fully inadequate regulatory structure.
Unpredictable and opaque political, legal and business environment with limited or nonexistent capital markets; low
CRT-5 human development and social instability; nascent insurance industry.
Country risk reports
A.M. Best Country Risk Reports are designed to provide a brief, high-level explanation of some of the key factors that determine a countrys Country
Risk Tier assignment. It is not intended to summarize A.M. Bests opinion on any particular insurance market or the prospects for that market.
Categories of risk
Country Risk Reports provide scores for three categories of risk for each country. These scores are (1) Very Low; (2) Low; (3) Moderate; (4) High
and (5) Very High.
Category of risk Definition
The likelihood that fundamental weaknesses in a countrys economy will cause adverse developments for an insurer.
Economic Risk A.M. Bests assessment of economic risk evaluates the state of the domestic economy, government finances and
international transactions, as well as prospects for growth and stability.
The likelihood that government or bureaucratic inefficiencies, societal tensions, inadequate legal system or
international tensions will cause adverse developments for an insurer. Political risk comprises the stability of the
Political Risk government and society, the effectiveness of international diplomatic relationships, the reliability and integrity
of the legal system and of the business infrastructure, the efficiency of the government bureaucracy, and the
appropriateness and effectiveness of the governments economic policies.
Financial system risk (which includes both insurance and non-insurance financial system risk) is the risk that financial
volatility may erupt due to inadequate reporting standards, weak banking system or asset markets, and/or poor
Financial System Risk regulatory structure. In addition, it includes an evaluation of whether the insurance industrys level of development and
public awareness, transparent and effective regulation and reporting standards, and sophisticated regulatory body will
contribute to a volatile financial system and compromise the ability of an insurer to pay claims.
Political risk Summary
To provide additional detail on the political risk in a given domicile the Country Risk Reports include the Political Risk Summary. The Political Risk
Summary is a radar chart that displays scores for nine different aspects of political risk scored on a scale of one to five with one being the least
amount of risk and five being the highest amount of risk.
Category Definition
International Transactions
Measures the effectiveness of the exchange rate regime and currency management.
Policy
Monetary Policy Measures the ability of a country to effectively implement monetary policy.
Fiscal Policy Measures the ability of a country to effectively implement fiscal policy.
Business Environment Measures the overall quality of the business environment and ease of doing business.
Labor Flexibility Measures the flexibility of the labor market, including the companys ability to hire and fire employees.
Government Stability Measures the degree of stability in a government.
Social Stability Measures the degree of social stability, including human development and political rights.
Regional Stability Measures the degree of stability in the region.
Legal System Measures the transparency and level of corruption in the legal system.

Country risk Tier Disclosure

A Country Risk Tier (CRT) is not a credit rating, rather it represents a component of A.M. Bests Credit Rating Methodology that is applied to all
insurers. A CRT is not a recommendation to purchase, hold or terminate any security, insurance policy, contract or any other financial obligation
issued by a government, an insurer or other rated issuer, nor does it address the suitability of any particular policy, contract or other financial
obligation for a specific purpose or purchaser.
Copyright 2016 by A.M. Best Company, Inc. Version 091714

Copyright 2016 A.M. Best Company, Inc. and/or its affiliates. ALL RIGHTS RESERVED. No part of this report or document
may be distributed in any electronic form or by any means, or stored in a database or retrieval system, without the prior written permission of
A.M. Best. For additional details, refer to our Terms of Use available at A.M. Best website: www.ambest.com/terms.