SMK facing liquidity crisis as liabilities surpass assets

The Syn Mun Kong Insurance Plc (SMK), overseen by the Office of the Insurance Commission (OIC), is facing significant liquidity issues and has been given 60 days to solve these problems and raise capital. However, the OIC suggests that SMK is unlikely to comply within the given timeframe.

SMK’s total liabilities have surpassed its assets, amounting to 30 billion baht, according to Somporn Suebthawilkul, president of the Thai General Insurance Association. If SMK’s license is revoked, the financial burden will shift entirely to the General Insurance Fund, which holds less than 1.4 billion baht, a figure that doesn’t include the financial burden from the closure of four insurers last year due to Covid-related losses.

After the Central Bankruptcy Court dismissed SMK’s rehabilitation petition on December 15, the OIC directed SMK to temporarily halt the acquisition of new customers. This move was to safeguard both its clientele and the general public from potential repercussions.

With liabilities surpassing assets and a capital adequacy ratio below the legal requirement, the OIC has requested a halt on any movement of SMK’s assets. The OIC stated, To prevent the company, agents and insurance brokers from selling new policies during the suspension, the OIC will appoint a team of officials to be stationed at SMK to look after its operations and provide maximum benefits to the public by performing the duties of the directors and executives of the company.

Under Section 52 of the General Insurance Act of 1992, SMK was directed on October 31, 2022, to increase its capital and rectify its financial position within a year to meet its obligations and maintain a legal capital adequacy ratio. SMK, however, has neither amplified its capital nor rectified its financial standing as per the order. Instead, SMK leaned on the business rehabilitation process in line with bankruptcy rules.

Upon the expiration of the one year, SMK requested an extension of the restructuring period. On April 25, 2022, SMK lodged a rehabilitation petition with the court, following a significant loss due to lump-sum Covid policies. However, the court ordered the cancellation of the rehabilitation plan on December 15.

Court Order

Post the court’s order, the authority and responsibility to manage SMK’s business and assets were returned to its management and shareholders, enabling the company to move or liquidate its assets.

The company has a status that may cause damage to the insured and the public, the OIC commented. Therefore, the regulator decided to use its power under Section 52 to direct SMK to temporarily stop providing non-life insurance, reported Bangkok Post.