Insurance Commission Replaces MOF as Authority to Approve Non-Thai Directorship and Foreign Shareholding in Excess of 49 Percent in Insurance Companies
One of the key strategies of the Office of Insurance Commission (OIC) under the Insurance Development Plan (Vol. 3) for 2016 to 2020 (the Insurance Development Plan) is to enhance the financial stability and capacity of Thailand's insurance industry. Among the schemes launched in a bid to achieve this, is to encourage foreign investment, which in turn would increase the sources of funding for insurance companies and result in knowledge transfer.
Under the current Non-Life Insurance Act B.E. 2535 (1992) and the Life Insurance Act B.E. 2535 (1992), as amended (collectively known as the Insurance Acts), insurance companies in Thailand can request approval to increase its foreign shareholding ratio to more than 49 percent and to increase its foreign directorship proportion to more than half. This would be applicable under the following three circumstances:
- doing so would improve the insurance company's standing or operations, where the company exists in a state that may cause damage to the policyholders or the public;
- doing so would strengthen the stability of the insurance company; or
- doing so would enhance the stability of the non-life and life insurance industries in Thailand as a whole.
Currently, the Minister of Finance (the "MOF") has the authority to grant such approval, on the recommendation of the Insurance Commission (the "Insurance Commission").
Recently, the OIC has published a draft Non-Life Insurance Act and a draft Life Insurance Act (collectively known as the Draft Acts), which will change and improve the current provisions in the Insurance Acts. The amendment relates to the competent authority granting approval of an increased foreign shareholding and directorship in an insurance company to more than 49 percent. That is, the Insurance Commission will have the authority to approve the increased foreign shareholding instead of the MOF. However, the application for the Insurance Commission's approval will still be subject to the criteria which will be prescribed by the MOF.
In addition, under the Draft Acts, upon the Insurance Commission granting such an approval, the OIC must make an announcement of the approval, together with the relevant rationale and conditions, in the Royal Gazette, and also notify the MOF about such grant.
A public hearing has been taking place for the Draft Acts since 23 August 2018 and is set to be completed on 7 September 2018. The OIC will then finalize the Draft Acts, following which the MOF will propose them to the Cabinet and Council of State. Finally, the Draft Acts will be considered by the National Legislative Assembly before enactment.
As the provisions in the Draft Acts are part of the scheme under the Insurance Development Plan, it is anticipated that the efforts may be made to push the Draft Acts out before the next general election. Therefore, it should not take long before the provision is enforced. It may be time for insurance companies in Thailand, especially those having more than 49% of non-Thai shareholding — which is set to expire in 2022 — or companies looking to conduct internal reorganizations to consider whether they would like to explore such possibility under the Draft Acts.