Ministry of Finance relaxes restrictions on foreign ownership of insurance companies operating in Thailand

by DLA Piper
Contact

DLA Piper

On 18 January 2017, the Ministry of Finance (MOF)’s notification was published in the government gazette, which liberalised the restrictions concerning the participation and ownership of foreign entities in the Thai insurance companies, with immediate effect.

The new measures allow a licensed insurance company (selling both life and non-life insurance) in Thailand to seek permission from the Finance Minister to have foreigners or foreign companies:

  • Control more than 49% (up to 100%) of the shareholding of the insurance company
  • Comprise more than half of the board of the directors of the company

This is a notable shift, but it is in line with the MOF's growing liberal approach that we have seen in recent years. In early 2015, the Office of Insurance Commission (OIC) was given the discretion to approve foreign entities' application for permission to control up to 49% (compared to the requirement of not less than 25% at the time) of the voting shares in an insurance company and more than a quarter, but less than half, of the total number of directors on the board.

Requirements to apply for permission

The MOF has issued the following requirements that a foreign entity or shareholder must satisfy to be eligible to apply for permission:

  • Be either an insurance company, or one that supports, or is very clearly related to the insurance sector
  • Have at least 10 years of experience in the insurance sector
  • Be financially stable with a credit rating of at least "A", issued by a respected international agency. If the foreign shareholding company does not have such a rating, its parent must
  • Possess clear and methodical business operation and technology transfer plans for the development of its insurance business in Thailand
  • Be sufficiently financially capable to help support, stabilise and develop its Thai insurance company and the insurance industry

If the Finance Minister grants an application to a foreign entity or shareholder, the insurance company will be required to maintain an available capital of the following:

  • At least THB 1 billion (circa $ 28.3 million) for a non-life insurance provider
  • At least THB 4 billion (circa $ 113.3 million) for a life insurance provider

It is important for any potential applicants to consider the capital requirements well in advance before devoting time, monies and resources into the application process, even though the capital requirements would only apply after the Finance Minister grants permission.

Timeline

  • Foreign entities or shareholders that fulfil the criteria may send their applications and associated documents to the OIC for consideration
  • The OIC will evaluate the documents received and may make further information requests
  • Within 90 days after deeming the submissions complete, the OIC will make a recommendation on whether the Finance Minister should grant the application
  • Within 90 days of receiving the OIC's recommendation, the Finance Minister will either grant or deny the application

Additional considerations

  • It is difficult to predict the amount of time and resources that applicants may have to devote to obtain permission, given that the MOF has not yet made its application form available
  • The Finance Minister, upon granting an application, may impose additional rules and time conditions at their discretion
  • It is necessary to obtain the Finance Minister's prior approval, before insurance companies make any material changes to its shareholding structure
  • There is currently no way of determining whether the application process will indeed function efficiently and within the prescribed timelines, given they were only just announced
  • Any material variation to the approved structure as stated in the application will require the Ministry of Finance's further approval

Commentary

When the MOF issued the previous notification allowing increases in foreign ownership rights of insurance companies up to 49%, many insurance companies took advantage of this, made applications and successfully received permission to do so from the OIC. While it cannot be guaranteed that this will carry over to the latest MOF notification, the recent relaxation of foreign ownership rules in Thai insurance companies do indicate the MOF's and OIC's increasingly liberal attitudes towards such applications.

There is, however, a key distinction between the 2015 amendments and the new 2017 Regulations. Under the previous 2015 rules, the OIC had discretion to review and grant applications for foreign entities to control up to 49% of a Thai insurer. The new 2017 rules however, require the MOF to take on a greater role in the approval process, in which the MOF ultimately decides, on the recommendation of the OIC, to approve or decline an application.

Overall, the new 2017 rules represents a step forward for the insurance industry in Thailand as the country further opens its economy to foreign investment. It remains to be seen whether the MOF intends to conduct an intense scrutiny into the recommendations of the OIC, or whether it will merely follow the advice of the OIC.

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.

© DLA Piper | Attorney Advertising

Written by:

DLA Piper
Contact
more
less

DLA Piper on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):
hide

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.

Security

JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at info@jdsupra.com. In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at: info@jdsupra.com.

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.