In more detail
Background
This Draft Ministerial Regulation will resolve a long-standing issue of multiple corporate standards applying to insurers obtaining licenses under different regulations. Currently, the corporate requirements for insurers are different, depending on when licenses were issued and which regulations were enforced at the time when a license was granted, or when the government granted new insurance licenses, in particular, one such example is the group of insurers whose licenses were issued under the Notification of the Ministry of Commerce B.E. 2538 (1995) ("MOC Notification"). Under the MOC Notification, these insurers are subject to quite a stringent set of requirements, such as restrictions in having common shareholders, directors and management with insurers that were established before 1995 – which has long been an issue for M&A transactions in the past.
With an aim to build a single corporate standard for all insurers, the OIC will replace all previous ministerial regulations and notifications (as well as the conditions prescribed in the business license of each insurer) with the Draft Ministerial Regulation. Once the Draft Ministerial Regulation becomes enforceable, all insurers will be subject to the same requirements.
New standardized corporate requirements
Under the Draft Ministerial Regulation, insurers are subject to the following standard requirements.
- Shareholding requirements
- Subject to certain exceptions, a life insurer is prohibited from having a shareholding relationship with another life insurer (i.e., having a common shareholder or holding more than 10% of the shares in another life insurer). This is also applicable to non-life insurers. However, there are also the following exceptions:
- Having a shareholding relationship with a licensed reinsurer
- Having a shareholding relationship with the Road Accident Victims Protection Company Limited
- Having a shareholding relationship with another life or non-life insurer for the purpose of rectifying financial distress and operational status of such insurer
- Having a shareholding relationship with another life or non-life insurer for the purpose of amalgamation or entire business transfer
- Other scenarios as permitted by the OIC.
This requirement does not have a retroactive effect. Therefore, insurers with shareholding structures not in line with the new regulation do not need to restructure.
- In addition, insurers must report to the OIC within 15 days from the date of any change of a shareholder holding 5% or more of the voting shares.
- Directorial issues
- The appointment of any director requires prior approval from the OIC, regardless of whether the director is newly appointed or re-elected.
- At least two directors must jointly sign, with the insurer's seal affixed, to form the authority to sign on behalf of the insurer (the signing conditions). The Draft Ministerial Regulation sets out a grace period of 90 days for all insurers to comply with this minimum signing condition.
- Corporate registration
Written approval from the OIC is mandatory before registration with the Ministry of Commerce regarding the amendment of:
- The memorandum of association
- The signing conditions
- Paid-up capital
- The articles of association.
This Draft Ministerial Regulation is expected to come into effect during the first half of 2024. Insurers are encouraged to familiarize with these new requirements for the purpose of compliance. We will keep you posted on developments. For more information and assistance, please contact our team.
Related content:
Thailand: Draft amendments to the Insurance Acts - latest developments
