Thailand - New Law Regulating Insurance Company Receipt And Payment Of Monies, Audit Measures And Internal Control

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The Office of the Insurance Commissioner (OIC) will be announcing the implementation of a new regulation that intends to encourage good corporate governance, accountability practice measures within insurance companies (both life and non-life) and internal control. The regulation was first expected to be effective on 1 January 2013 but it has been advised that the effective date be postponed to July 2013.

The main consequences for this new regulation are as follows:

Receipt and payment of monies
  • Insurance companies must come up with procedures regarding receipt and payment of monies and inspection and internal control. Such procedures shall be approved by the Board of Directors of the company and might be subjected to audit by the OIC if requested. 
  • Insurance companies must implement a back-up system (in the case of electronic filing) and maintain relevant documents and information in relation to the receipt or payment of monies for a minimum period of five years from the date money was paid out or received.
  • The procedures should specify the steps, turn-around time, responsible person and the inspector keeping in mind the check and balance system. 
  • Rules to control the usage of the receipts in order to prevent fraud and maintain suspense account and collection control should be in place. 
Audit committee and internal audit
  • Insurance companies will be required to set up an audit committee comprising at least three members. Such audit committee shall be approved by the Board of directors or shareholders of the company. 
  • At least two-thirds of the members must be independent. The resolution appointing the audit committee together with the names and biographies of the members and the charter of the committee must be submitted to the OIC within 15 days from the date of appointment.
  • At least one member of the committee shall have knowledge or experience in finance or accounting in order to be able to inspect the company's financial statement.
  • The independent member of the committee shall have qualifications and shall not be restricted from being appointed to an audit committee as specified by OIC. 
  • The term of the audit member should not be more than four years. The meeting of the committee shall be conducted at least once every quarter in order to follow up internal audit's performance and company's operation.
  • Internal audit shall be appointed by and directly report to the audit committee with approval from the company's Board of directors. Internal audit might be outsourced or use the group's internal audit sector and shall directly report to the audit committee.
  • In the case of internal audit being outsourced with approval of the company's Board of directors, a written agreement shall be in place specifying the objectives, scopes of work, access to personal information, areas, including related information and procedures, owners and keepers of working papers and confidentiality covenants.
Internal control
  • Insurance companies must arrange for internal control in relation to underwriting, claims payment, reinsurance, product development, insurance pricing, investment in other business and receipt and payment of monies. 
  • Insurance companies will be required to set up a compliance section, or section equivalent to compliance, to report directly to the company's Board of directors or audit committee. The purpose is to ensure that the company complies with the law and other related rules and regulations. A compliance officer which is within the managerial level shall be the contact point with the OIC. 
  • Insurance companies must arrange to have a written manual specifying the powers, duties, responsibilities, goals and objectives for each function.  
  • Insurance companies must maintain controls over and strictly comply with the law regarding anti-money laundering and terrorist support.
  • Insurance companies must follow up and appraise the results of internal control at least once a year and report such findings to the company's Board of directors with comments from the audit committee.

While these new rules and regulations are intended to raise standards within the insurance market to meet international standards and to make the market ready for the Asean Economic Community in the next couple of years, they may also have significant effect for insurance companies both life and non-life (especially those 'small size players').

This blog was authored by DLA Piper Consultant, Jonathan Goacher and DLA Piper Senior Associate, Nimon Chandhrakul.

Topics:  Audits, Corporate Governance, Insurance Companies, Insurance Reform, Internal Controls

Published In: Insurance Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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