By Sonia Krisnan
Timber-based companies in Malaysia are facing an uphill task to underwrite their risks as insurers are shunning them due to past claims ratio for the sector.
The companies are having issues in getting underwriting for their properties, workmen's compensation claims and fire risks, one timber-based company representative told a recent dialoque organised by the Malaysian Timber Industry Board (MTIB).
When contacted, insurers say they are more careful and selective in underwriting risks from timber-based companies as the experience in insuring the sector has generally not improved despite insurers introducing risk improvement measures over the years.
"We're very selective, unless proper risk management and prevention are in place," Syarikat Takaful Malaysia Bhd (Takaful Malaysia) group managing director, Datuk Mohamed Hassan Md Kamil, told The Malaysian Reserve.
In an email reply, Overseas Assurance Corp (M) Bhd chief executive officer Ng Kok Kheng said that the timber industry needs to seriously look at its own operations and find ways to actually reduce its bad claims incidents.
"Although the inherent fire risk is said to be high, not much effort has been taken by industry players to reduce this hazard," he said.
Without providing any figures, a spokesman for the General Insurance Association of Malaysia (PIAM) said that the "losses are beyond tolerance".
Malaysia's timber and timber products growth is projected to grow 6.5% this year compared to its record of RM19.49 billion in 2009, according to a survey by Malaysian Timber Industry Board.
Another general insurer said Malaysia has seen foreign investments in the sector and at least they bring in their better technology and risk management thinking.
"Locals should try to learn from them or take the advice of risk engineers on how they can improve the safety of their operations," he said.
On the insurers' side, Mohamed Hassan said the insurance companies are also finding it tougher to get reinsurance support for wood-based companies.
Insurance companies generally parcel out risks to reinsurance companies like Malaysian Reinsurance Bhd and Swiss Reinsurance Company as part of their risk management strategy.
Another issue faced by insurers are the rates at work in the present market.
"Rates are thin, risks are high. As an insurer, obviously, I would like to see an upward movement of rates," he said. In the past, Mohamed Hassan said Takaful Malaysia has actually declined business coming its way from woodbased companies.
[The Malaysian Reserve, 7 Feb 2011]