The Office of Insurance Commission (OIC) was established in 2007 under the Thailand Government Insurance Commission Act, B.E. 2550. The OIC has now been a regulator of the insurance industry for over a decade, supervising all aspects of both life and nonlife insurance, including their brokers and agents, under the supervision of the Ministry of Finance and is administered by a board of directors consisting of the permanent secretaries of the ministries of finance and commerce, the secretary-general of the Consumer Protection Board, the governor of the Bank of Thailand, the secretary-general of the Securities and Exchange Commission, and the secretary general of the OIC.
In 2016, the OIC amended the Life and Non-Life Insurance Acts which repealed the current version of the Acts and all subsequent amendments. This is a significant impact on the insurance industry. The changes include the introduction of a requirement on change in control, requirements for fit and proper directors and officers, requirements on actuaries (non-life insurance), and stricter broker licensing rules.
During 2020-2022, some domestic insurance companies were heavily affected by COVID-19 — particularly the insurers who insured against COVID-19 infection without any reinsurance overseas. After the considerable number of COVID-19 infections in 2021, the unexpected claims under the COVID-19 policies caused a few non-life insurance companies to become insolvent, and they were not able to cover all non-life claims.
In addition, the OIC issued various relief measures for the insurance business in response to COVID-19. These included measures relating to the application for and the renewal of a broker license during the COVID-19 pandemic, as well as measures relating to the filing of reports regarding the results of the business operations. In particular, the corporate brokers which are affected by COVID-19 pandemic can submit a request to the OIC for the extension of the deadline for the submission of certain reports (e.g., audited financial statement and reports on the results of business operations).
The OIC also issued a Notification re: Conditions, Issuing and Offering of Insurance Policies of Life-Insurance Companies B.E. 2563, which also provides an exemption for face-to-face sales of insurance products to be carried out digitally (e.g., by voice, video, or images), provided that there is a justifiable necessity for doing so and that the customer in question consents to the digital face-to-face meeting. Insurance companies and intermediaries must arrange for appropriate systems and sales processes to accommodate this, such as maintaining communication records and quality control and ensuring the proper protection of personal data.
Permission to operate
Since 2008, amendments to the Life Insurance Act 1992 and the Non-Life Insurance Act 1992 have stipulated that life and non-life insurance businesses can only be undertaken by a public limited company under the relevant public company legislation, or a branch office of a foreign insurer (in both cases, subject to a license being granted to operate from the Ministry of Finance, with approval of the cabinet). Transitional arrangements were granted to private companies already registered and licensed until February 2013, from which date any non-compliant insurer can continue to operate for a further three years, but cannot issue new policies. Failure to convert to a public company by February 2016 will lead to a revocation of license.
Insurers and reinsurers can only carry out the business specified in their business licenses. The Life and Non-Life Insurance Acts set out a number of activities and investments which insurers are prohibited from pursuing. The OIC also issues regulations restricting the ways in which insurers may invest their funds. Life insurers cannot engage in non-life business and vice versa.
Domestic insurers
Insurance/reinsurance providers
The Insurance Acts prohibit any person from entering into an insurance contract or acting as an insurer unless he has obtained a license to engage in life/non-life insurance business. An application for a license to engage in the insurance business must be lodged the company promoters with the Ministry of Finance. On approval being granted by the Minister, the promoters must:
- Be formed as a public company limited;
- lodge a security deposit; and
- maintain an adequate capital fund within six months of incorporation.
On satisfying the aforementioned criteria, a license will be issued. If the company is unable to satisfy the capital and deposit requirements within six months of incorporation, the approval is deemed to be revoked.
At present, the insurance market is crowded, and the Thai government's long-standing policy is that no new insurance business license will be issued. Accordingly, in practice, new players can only enter the Thai insurance market by way of an M&A.
Insurance/reinsurance intermediaries
A broker, defined as a person who, expecting a commission, indicates the opportunity or arranges for a person to enter into a non-life/ life insurance contract with a company, is required to obtain a license from the OIC. Broker licenses may be awarded to individuals or corporate entities.
An agent, defined as a person assigned by a company to induce persons to enter into a non-life/life insurance contract with the company, must obtain a license from the OIC, which is specific to a single insurer. Agent licenses are only granted to individuals, who must fulfil a number of criteria relating to qualifications and suitability. No person may hold both a broker's and agent's license.
International insurers
Insurance/reinsurance providers
At least 75% of the voting shares of an insurance company must be held by either:
- Thai individuals or Thai non-registered partnerships, in which all partners are Thai nationals; or
- Entities registered in Thailand which have more than 50% of their voting shares held by persons falling within the first point above, or by a parent company fulfilling the same conditions.
The OIC has the power to permit up to 49% foreign ownership subject to the requirements set out in OIC Notification re: criteria for nonThais to hold up to 49% in (life and non-life) insurance companies.
Beyond that, under 2016 Ministry of Finance Notifications, the Minister has discretion to allow foreign ownership of greater than 49% in insurance companies (both life and non-life) under certain circumstances. The minister also has the authority to allow more than onehalf of the board of directors to be comprised of non-Thai directors.
In 2023, the OIC introduced updated regulations, procedures and conditions governing reinsurance for both life and non-life insurance sectors. These changes were outlined in the Notifications re: Rules, Procedures and Conditions on Reinsurance for Life and NonLife Insurance Companies B.E. 2566. These notifications aim to establish comprehensive guidelines and prerequisites for a ceding company to adhere to, including the following requirements:
(i) Procuring a Reinsurance Management Framework (RMF).
(ii) Procuring risk management controls for reinsurance activities.
(iii) Considering the credit rating as suggested by the OIC notification for treaty reinsurance and facultative reinsurance.
(iv) Entry into financial reinsurance contracts or finite reinsurance contracts is subject to the following conditions:
- obtaining advice on appropriateness from an actuary and with the approval of the Board of Directors;
- undergoing an assessment for significant transfer of risks certified by an auditor approved by SEC; and
- maintaining pertinent supporting documentation as required for further review/examination by the OIC (if so required).
(v) Submitting a reinsurance efficiency analysis report to the OIC within the required time period.
The 2023 notifications were issued as legal measures for the supervision of reinsurance business by foreign reinsurers in Thailand.
Insurance/reinsurance intermediaries
An insurance broker must have its head office in Thailand, and must have among its business objectives "life insurance brokerage business" and/or "non-life insurance brokerage business," as the case may be. Insurance brokerage business is reserved for Thais under the Foreign Business Act B.E. 2542, and, as such, a company with 50% or more foreign shareholding would require a foreign business license.
Other providers of insurance/reinsurance-related activities
Other service providers would be subject to the provisions of the Foreign Business Act described above.
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Originally Published by Thomson Reuters
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