In more detail

Current regime

There are currently licensing requirements for companies operating an insurance business and reinsurance business in Thailand.

Insurance licenses – The last insurance license was issued in 1997. Since then, the government has not had a policy to issue new insurance licenses. The granting of a license requires the Cabinet's approval with the recommendation of the Minister of Finance (MOF). Reinsurance brokerage licenses – Although reinsurance brokerage licenses are still granted, there are certain requirements for obtaining a reinsurance brokerage license from the Office of Insurance Commission (OIC)

In addition to licensing requirements, insurance and reinsurance brokerage companies are subject to foreign shareholding restrictions.

Insurers – Generally, licensed insurers in Thailand can have up to only 25% foreign shareholding. This can increase up to 49% with the OIC's approval and, in very limited circumstances and subject to a rigorous application process, up to 100% with the MOF's approval. Reinsurance brokerage companies – These companies are subject to the foreign shareholding limitations as stipulated by the Foreign Business Act; namely, foreign nationals and corporations must hold less than half of their share capital. Foreigners can hold higher share of the company's capital if a foreign business license has been obtained.

Because of these restrictions, entry into Thailand for new players and the stepping up of foreign shareholding for certain existing players could be challenging.

Proposed new regime under the Draft Act

In alignment with the government's vision to position Thailand as a regional financial hub while preserving the integrity of the local market, the Draft Financial Hub Act ("Draft Act") emphasizes attracting international companies to provide services to customers outside Thailand. Qualified newcomers – such as an insurance company or a reinsurance brokerage company who is not part of a group of companies conducting business in Thailand – may apply for a license from the Financial Hub Promotion Committee ("Committee") with the recommendation of the Office of the Financial Hub Promotion Committee ("Office"). The Committee is empowered to prescribe the duration of the license as well as renewal requirements. Under this scheme, newcomers may be granted certain privileges and could be exempted from certain requirements that insurers and reinsurance brokers would otherwise be subject to under the normal scheme. Below is a summary of the key benefits and requirements.

• Scope of permissible insurance/reinsurance brokerage business – Licensed entrants (insurers and reinsurance brokerage companies) are to target customers outside of Thailand, such as overseas insureds or insurance companies seeking reinsurance. Subject to the OIC's approval, they may target customers in Thailand, in which case additional requirements could be imposed.
• Benefits – Licensed entrants may enjoy less stringent restrictions on foreign shareholding, the right to own certain properties, the right to hire foreign workers, and the right to transact in foreign currencies.

Licensed entrants could be subject to less stringent restrictions on foreign shareholding though it is unclear if foreigners will be entitled to wholly own a licensed insurer.	Licensed entrants could own condominium units (foreign ownership requirement is exempted). Nonetheless, it is unclear if the OIC's approval for acquiring property will still be required.	Management members, experts, and their spouse and dependents are allowed to stay in Thailand.

• Requirements – Licensed entrants are subject to certain requirements. Their shareholders, directors and persons having the authority to manage business operations must have the qualifications prescribed by law, and any changes to these individuals will require prior approval from the Office. Prior approval from the Committee will be required for the termination or transfer of their businesses. Outsourcing of core business operations is not allowed unless the Office permits it. The entrants will also be required to employ Thai staff at the ratio set out by the Committee.

OIC's responses

The OIC acknowledges the potential for Thailand to develop as a regional insurance hub through the Draft Act, noting that the Draft Act could benefit Thailand in the following ways.

New entrants could bring funds and promote the transfer of know-how and technological advancements.	Local players could gain from the introduction of international insurers and reinsurance brokers.	Licensed insurance companies under the Draft Act could reinsure with local companies.	Licensed reinsurance brokers might identify new opportunities for local insurers.

Opportunities

This forward looking development could enhance the industry's efficiency in business operations and risk management. For example, it could provide more reinsurance options for local risks, allowing for better risk allocation. The success of the Thai insurance/reinsurance brokerage hub could, in turn, drive demand for skilled professionals in related fields such as actuaries, loss adjusters, agents, and brokers, thereby encouraging more individuals to pursue careers in these areas. In addition, major insurance groups could be attracted to use Thailand as a hub for its regional operations.

Status of the Draft Act

The Draft Act has been approved by the Cabinet. It is now under the legislative process. We will keep you informed if there are any further updates.

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