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MARKET REPORT - THAILAND
likely to increase from 95% to 99.5%, although the regulator Community (AEC) expected in late 2015.
is considering a gradual increase with an expected five-year Capital Requirements to strengthen the Industry
transition period. As discussed in the earlier section, the OIC has laid out plans to
increase the capital position of Insurance companies to ensure
RBC Phase 2 is moving towards more principle-based a strong and robust Industry
orientation which should encourage insurers to enhance its Increased M&A activity
internal risk management process. The higher risk charges The strengthening of the regulatory capital framework would
would discourage insurers from investing in high risk assets. benefit the insurance sector in the long term. However, the
smaller insurers may have face difficulties meeting the more
Continuing with the regulatory reforms to strengthen stringent capital requirement in the upcoming risk-based capital
Thailand’s insurance industry, the OIC is also considering (RBC) Phase 2, and the potential higher minimum capital
increasing the minimum capital requirement to THB500 requirement. This could lead to an increased M&A activity
million for non-life (up from THB300 million) and THB1 with industry consolidation likely to continue, particularly
billion for life (up from THB500 million). in the fragmented non-life insurance sector. M&A activity is
likely to be driven by the rising capital requirements, a drive to
Reinsurers have been offering and will continue to offer achieve economies of scale, and foreign interest in the strong
capital relief solutions to insurance companies in the light potential of Thailand’s insurance sector.
of expected and more stringent capital requirements with De-tariffication
RBC II. There are talks of de-tariffication in the near future. In a RBC
Future of the market environment, this would allow companies to charge appropriate
ASEAN Economic Community (AEC) premium commensurate with the risk underwritten.
The World Bank has reportedly been involved in developing and Role of NCIF
moving ASEAN countries in the same direction for the 2015 The scheme needs to reinvent itself to be more viable in the
AEC. In addition, it has been reported The World Bank and future. There are numerous gaps in areas such as cover, pricing
Japan will promote Thailand as the insurance hub of ASEAN issues, and anti-selection which make the scheme in its current
and help to train Thai personnel on various related areas. form untenable.
The bank will also give professional services and technical Thailand continues to be a dominant player in the
assistance, including knowledge and information, to Myanmar, manufacturing sector, which has suffered a setback in recent
Laos, Cambodia and Vietnam. This is in line with the OIC’s years following the floods. In an effort to revive the economy,
plan to help develop the neighbouring countries’ insurance the military government has made some key additions to the
sectors and would be most helpful when cross-border projects finance and commerce portfolios. The economy’s recovery in
are taking place with regard to offering insurance products. the short term future is going to be driven by stability to the
political system and a return to democracy. In the meantime,
Various regulatory reforms have been initiated by OIC in the P&C insurance sector in Thailand continues to tap into
recent years based on standards of the International Association all possible distribution channels in its pursuit of growth and
of Insurance Supervisors and International Financial Reporting market share.
Standards. Improvements have also been planned on domestic
internal enterprise risk management practices.
Foreign ownership is still capped at 49%, although the OIC
may raise the limit in the near future as part of a liberalisation
plan to coincide with the opening of the ASEAN Economic
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