Thailand: Clarification on the purchase and acquisition of immovable assets by insurance companies

11 Dec 2023    3 minute read
Topics Insurance

In brief

The Office of the Insurance Commission (OIC) has issued two new guidelines with details on how insurers can seek approval from the OIC for the purchase or acquisition of immovable assets. The guidelines will become effective on 18 December 2023.

Contents

In more detail

Insurers are generally prohibited from acquiring immovable assets, unless for certain specified purposes and with prior approval from the OIC. "Acquiring" in this instance refers to the holding of ownership rights over the immovable asset, or possession rights over lands pursuant to the certificate of utilization; but does not include rights that are obtained through a lease.

The purposes for which insurers can acquire an immovable asset are:

  • the immovable asset will be used as its place of business or for the welfare of its officers and employees as appropriate; or
  • the immovable asset is acquired in a debt settlement or enforcement of a mortgage.

Prior approval from the OIC is required for acquisition of all immovable assets, except for acquisition through enforcement of a mortgage. The guidelines describe how the OIC approval can be obtained.

Purpose Qualifications/Required information
The immovable asset is used as its place of business or for the welfare of its officers and employees as appropriate.

Qualifications of the insurer

  1. Having capital adequacy ratio (CAR) of at least the minimum legal requirement.
  2. Having sufficient excess capital funds.
  3. Having investment asset to insurance reserve ratio of not less than 100% (for life insurers) or liquid assets ratio of not less than 100% (for non-life insurers).
  4. Having allocated assets for debt and obligations under insurance contracts, as required by law.
  5. The total value of all immovable assets that the insurer holds (or which the insurer is required to dispose of) and will hold (after OIC approval is obtained) does not exceed 15% of its total assets. This threshold will not be required if the company has no immovable assets that are required to be disposed of.

Required information

  1. Objective, reason, or necessity to purchase or acquire the immovable asset, including effects on its financial status.
  2. Details of the immovable asset (e.g., title documents, type, location, size), which, in the case of land lease for the construction of buildings, must include the lease duration.
  3. Approval of the board or approval by another committee as designated by the board.
  4. Internal policy and process with respect to the acquisition or holding of immovable assets.
  5. Appraisal report (detail requirements subject to the assets price).
  6. Construction details, plan, and tentative completion date (in the case of construction above an immovable asset).
The acquisition price must not exceed the highest assessed price, unless there is a necessity and supporting reasons to do so. In any case, the price must not exceed 20% of the assessed price.
The immovable asset is acquired in a debt settlement or enforcement of a mortgage.

Required information

  1. Objective, reason, or necessity of the insurer to settle the debt via an immovable asset instead of cash, which must include details demonstrating that the insurer has suggested to the debtor the best and most suitable solution to reduce the debt, but the debtor has no capacity to repay the debt; demonstrate that debt settlement via an immovable asset is more advantageous to the insurer than court proceedings, and outline how the insurer will manage the asset.
  2. Details of the immovable asset (e.g., type, location, size).
  3. Board or committee approval.
  4. Internal policy and process with respect to debt settlement via immovable assets. 
  5. Appraisal report (detail requirements subject to the assets price).
The price of the immovable asset must not exceed 70% of its market price (being the highest assessed price). If the price of the asset is more than the debt to be settled, the insurer must not pay the excess amount.

 

The OIC may request additional information from the insurer applicant. After receiving all documents, the OIC will decide whether to grant approval within one month. The OIC may impose conditions when granting approval.

The guidelines should provide more clarity and certainty for insurers seeking OIC approval for immovable asset acquisition.

Please contact us if you have any questions.

Contact Information
Amnart Pitakgorn
Partner
Bangkok
Read my Bio
amnart.pitakgorn@bakermckenzie.com
Jarae Sithiwong
Partner
Bangkok
Read my Bio
jarae.sithiwong@bakermckenzie.com
Thitapa Haritaworn
Associate
London
thitapa.haritaworn@bakermckenzie.com

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