As per the National Insurance Liberalization Plan as approved by the Cabinet on 11 April 1995 (the Insurance Liberalization Plan), the Thai insurance industry has continuously developed and liberalized over the past two decades. The plan consists of three phases. In the first phase, local companies were encouraged to operate insurance businesses, and were granted licenses by the Cabinet during 1995 - 1997. The second phase saw the relaxation on foreign shareholding limits among insurance companies, from up to 25% to 49% and beyond 49% of each licensed insurance company’s registered capital. This was achieved by amending the Life Insurance and Non-Life Insurance Acts B.E. 2535 (1992) in 2008.
Having successfully completed phases one and two and having ascertained that local insurance companies have the capacity to compete with foreign insurers; the plan has progressed to phase three, which focuses on attracting foreign insurers into Thailand. With the ever-increasing liberalization of a once protected industry, Thailand can look forward to long-term growth in the insurance industry and reap the benefits of foreign investment and expertise.
The Office of the Insurance Commission (the OIC) has recently been requested by the Ministry of Finance (the MOF) to conduct a feasibility study on potentially transforming Thailand into a reinsurance hub. This reinsurance hub initiative is part of the third and final phase of the Insurance Liberalization Plan. With the feasibility study progressing, the OIC may consider issuing new reinsurance licenses to offshore reinsurers. An open policy will attract established foreign insurers that are large and resilient enough to increase local market capacity.
From recent news and surveys, the industry appears to have reacted positively to this initiative. Supporters of this initiative highlight the fact that the scheme would ensure that monetary capital is retained in Thailand, and not ceded to the two offshore insurance hubs in the region, e.g. Singapore and Hong Kong. Particularly, in light of the recent mega-infrastructure projects initiated by the Thai government (e.g. the EEC and CLMV projects), Thailand can benefit from an increased liquidity. Tax exemptions and Board of Investment privileges may be among the incentives to the scheme's success.
Our insurance team is closely monitoring the implementation of phase three of the Insurance Liberalization Plan and will be releasing further alerts to ensure that you remain aware of any impending changes.