According to a statement by the country’s finance ministry, Thailand will loosen its grip on stringent foreign ownership rules by allowing foreigners to hold controlling stakes in domestic life insurance firms.
It will now allow licensed insurance firms to apply to the department for permission to have more than 49% (and up to 100%) foreign shareholding, and for foreign directors to comprise more than half of the directors on its board.
In a statement on its website, regional law firm Tilleke & Gibbins said that in order for firms to be granted permission, they must have sufficient capital adequacy ratios (CAR) as set out by the Office of Insurance Commission, as well as a business plan for “promoting stability for insurance companies or the overall insurance industry”.
“This appears to be a significant movement for the Thai insurance industry, especially on the life insurance side. For the past several years, there has been some direction toward liberalisation on the non-life insurance side — possibly due to the various catastrophic events within Thailand over recent years,” added the law firm, which has offices in Bangkok.
Once permission is granted, the life company must have total capital available of THB4bn (£90.2m, €105m, $113m) at all times, and throughout its business operation period.
Tilleke & Gibbins also revealed that the proposed foreign shareholder must:
- Be an insurance company, or a company engaged in a business that supports, or is related to, the insurance industry;
- Have not less than 10 years of expertise and experience related to and supporting the insurance business;
- Have financial stability and possess a credit rating, or have a parent company with a credit rating, of not less than “A”, which has been issued by a reputable credit rating agency with international network of business operations;
- Have a clear direction in respect to its business operation policy and technology transfer plan, for the purpose of developing the company’s business operation system, in order to promote the company’s efficiency and ability to compete in the market; and
- Have sufficient financial capability to support and promote the stability of the company, or the overall insurance industry
The finance ministry confirmed that the measures are effective immediately.
It comes as Chinese premier Ma Kai announced a similar move last November when he met with British chancellor of the exchequer Philip Hammond in London.