Earlier this year, Thailand’s Ministry of Finance (MOF) made amendments to the rules governing foreign investment in the country’s insurance industry, a move that could promote an influx of overseas investors but also place more pressure on smaller insurance firms, an expert warns.
Under the new regulations, foreign entities can own up to 100% of a domestic insurer, up from a previous limit of 49%. Also, non-Thai citizens can now make up more than half of a firm’s board of directors.
Companies seeking to acquire a domestic insurer must be an insurance firm or be engaged in a business that is clearly related to insurance. Additionally, the company must have been involved in insurance for at least 10 years, financially stable, and have a credit score of “A” or above from an internationally recognised ratings agency.
Non-life insurers need to maintain a capital requirement of THB1 billion (US$28.3 million) while life insurers need at least THB4 billion (US$113.4 million).
While one of the outcomes of this move is increased foreign investment, Suthiphon Thaveechaiyagarn, secretary-general of the OIC, warns that it could be challenging for smaller insurers due to increased competition. However, technology could serve as a great equalizer.
“While this competitive edge can offer advantages to end users, the rivalry and pressure to keep policy prices low can erode margins for smaller, less well capitalised insurers,” Thaveechaiyagarn told the Oxford Business Group. “However, this could change with the advent of financial technology, which could level the playing field for smaller companies. For example, small companies can create new distribution channels via smartphone applications to reach customers directly without paying any commission.”
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