Asia Pacific Insurance

Thailand

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Insurance Regulatory Landscape and Key Considerations for M&A Transactions
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Insurance Regulatory Landscape and Key Considerations for M&A Transactions Start Comparison
Who is the main regulator with oversight of insurance companies?

Office of Insurance Commission (OIC)

Are there foreign ownership limitations for insurance companies? Are there shareholding caps on individuals and/or corporate bodies for insurance companies? If in the affirmative, is this encapsulated within statute or a matter of policy?
There is a maximum foreign ownership of 25%.
However, the OIC is empowered to permit foreign investor to hold up to 49%.With the approval of the Minister of Finance, a foreigner can own more than 49% if:
  • It would improve the insurance company's standing or operation, which exists in such a state that may cause damage to the insured or the public.
  • It would enhance the stability of the insurance company.
  • It would enhance the stability of the insurance industry as a whole in Thailand.
Can an insurance company carry on a composite business (i.e., life and non-life)? Is this encapsulated in statute or a matter of policy?

No (a matter of law).

Are there other conditions imposed by the regulator in doing an M&A transaction?

No.

Is dispensation given for fulfillment of these conditions and in what circumstances?

Not applicable.

Is there a single presence policy and is it imposed under statute or policy? Is dispensation given and what criteria will the regulator consider?
No. The OIC's current position is to encourage mergers and acquisitions among insurance companies.
Under the Insurance Acts, the MOF may grant permission to an insurance company allowing foreigner(s) to hold more than 49% (up to 100%) of the total voting shares sold in the company if:
  • It would improve the insurance company's standing or operations, which exist in such a state that may cause damage to the insured or the public.
  • It would enhance the stability of the insurance company.
  • It would enhance the stability of the insurance industry as a whole in Thailand.
According to the draft MOF's notification, foreigner(s) who had received approval from the MOF under conditions b and c to hold more than 49% of the total voting shares sold or entities under the same group of such foreigner(s) will not be permitted to operate an insurance business in Thailand, either through a branch of a foreign insurer or by holding shares in other licensed insurance companies in Thailand, unless it is an investment in a mutual fund or other forms of business similar to a mutual fund; provided that such investment is not for the purpose of circumventing the single presence rule.
What approvals are required for a foreign entity to take a stake in an insurer? Is there a distinction between a share deal or an asset deal?

Share deal

If a foreigner's stake is not more than 25% of the insurance company, no approval is required. If the foreigner's shareholding is more than 25% or 49%, prior approval from the OIC or MOF is required (as the case may be). If the foreigner's shareholding is more than 49%, the foreigner will be subject to the single presence policy.

Asset deal

A transfer of business, either in whole or in part, must be approved by the OIC. The board of directors of the acquiring company and the transferring company must jointly prepare and submit the project plan to the OIC. When granting approval, the OIC may prescribe any conditions to protect the insured's interest and to ensure stability of the company.

How long will regulatory approvals typically take for a share deal versus an asset deal?

Share deal

The approval to increase foreign shareholding limit up to 49%t takes approximately three months, whereas the approval to increase foreign shareholding limit to 100% takes approximately six months.

Asset deal

Approval takes approximately three months.

How open is the regulator to private equity participation in an insurer?

Thers is no statutory prohibition. The OIC does not favor private equity participation unles it has a solid record of investing in the insurance markets.

Is there a financial holding company concept (FHC) or other equivalent status? What are the implications?

There is no FHC concept for insurance companies.

What are the typical modes of distribution for insurance companies?

Agency force, brokers, telemarketing and bancassurance

Is bancassurance a popular mode of distribution? What approvals are required? What are the main parameters in negotiating a bancassurance agreement?

Yes, bancassurance is a popular mode of distribution. Banks conducting bancassurance business must obtain an insurance brokerage license from the OIC. In addition, the person who sells must be a bank officer who holds an individual insurance brokerage license.

The salient terms are:

  • Fees and commissions
  • Products
  • Term and renewal
  • Risk allocation
  • Exclusivity
What are the top challenges in closing an insurance M&A transaction (share deal versus asset deal)?

Share deal

  • Approval from the OIC or MOF if acquiring more than 25% or 49% (as the case may be)
  • Stringent shareholding requirements
  • Price

Asset deal

  • Approval from the OIC
  • Practical obstacle in obtaining consent of insured for the transfer of insurance policies
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