In more detail
The default foreign shareholding limit for life and non-life insurance companies is 25%. This limit can be increased to 49% with approval from the OIC and to more than 49% (up to 100%) with exemption permission from the Ministry of Finance (MOF). The MOF exemption permission may also allow insurers to increase the number of foreign directors to half or more of the total directors.
Approval from the OIC for up to 49% foreign shareholding may be granted on one of the following grounds:
- The insurer's capital adequacy ratio is or will likely to be lower than the ratio prescribed by law.
- The increase will contribute to improvements in the company's management to enhance its operation capabilities and competitiveness.
Exemption permission from the MOF may be granted, with recommendation from the OIC, on one of the following grounds:
- The increase would improve the company's standing or operations, where the company's current operations may cause damage to the policyholders or the public1.
- The increase would strengthen the company's stability.
- The increase would enhance the stability of the insurance industry in Thailand as a whole.
The current regulations only prescribe the grounds for seeking approval from the OIC or exemption permission from the MOF but do not go into detail on how the OIC interprets qualifications and the information insurers will need to provide in order to demonstrate that they qualify to seek such approval.
The Draft Guidelines provide details on supporting documents, qualifications of applicants, and other information that will need to be presented. Below we summarize those details.
| Supporting documents |
A detailed checklist of documents and information are provided. |
| Applicant qualifications (group wide perspective) |
The proposed foreign shareholder must have the following key qualifications:
- Financial status and expertise – The foreign shareholder's financial status will be considered from a group-wide perspective. For example, if the shareholder is a holding company, the OIC would also consider its parent's financial status, as well as other factors such as the group's financial policies and expertise.
- International business network – Business network may not be limited to the insurance network. The OIC has the discretion to consider other networks presented by the applicant.
This shows the OIC's willingness to more holistically consider potential contributions from the foreign shareholder, which may attract more potential investors with strong financial backgrounds to invest in the Thai insurance industry.
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| New options for the technology transfer plan |
The OIC generally expects to see technology transfer in the application. The Draft Guidelines offer more flexibility on the types and means of technology transfer. For example, technology transfer may accomplished through:
- A licensing arrangement
- Technology training by experts
- Provision of financial support to the insurer to develop technology or insurtech
- A plan to invest in or cooperate with insurtech firms
This may contribute to the functions of the insurer, such as marketing, product development, distribution channel, underwriting, risk assessment and management, customer service and retention, compensation management, actuary, reinsurance, internal support system, and financial report compliance.
This flexibility could encourage potential investors to explore opportunities in expanding their investment in Thailand.
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| Business plan |
The Draft Guidelines explain that the business plan should demonstrate how additional foreign investment would allow the applicant to:
- Improve management to enhance operational capabilities and competitiveness (in case of OIC approval for up to 49% foreign shareholding).
- Strengthen its stability or enhance the stability of the insurance industry in Thailand as a whole (in case of MOF exemption permission for more than 49% foreign shareholding).
In addition to the above, the applicant may describe other contributions, such as the ability to become an insurtech leader or the potential to expand into related businesses.
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| Internal restructure |
The current regulations can be read in a way that requires a new approval from the OIC or exemption permission from the MOF (as applicable) where the foreign shareholder undergoes an internal restructuring. The Draft Guidelines make clear that for an internal restructuring whereby the ultimate parent of the approved foreign shareholder does not change, the insurer will only need to submit some information but a full application process will not be triggered. |
The OIC is now reviewing the outcome of the public hearing. Following that, the OIC will decide whether to publish the Draft Guidelines or schedule another public hearing, depending on its consideration and concerns with the Draft Guidelines. We are closely monitoring the situation and will be releasing further alerts to ensure you remain aware of further updates.
Conclusion
This is a good opportunity for foreign investors to revisit their investment plans, given the Draft Guidelines show the OIC's willingness to take a more practical and commercial approach in considering applications for increasing foreign shareholding. More clarity on the requirements for an approval could also provide certainty for foreign investors that are considering investing in Thailand. We will be happy to discuss with you further if you have any questions.
1 Currently, there is only sub-regulation applicable to the case of non-life insurers. Sub-regulation for life insurer has not been announced yet.
