Thailand

 

Supervision and Control

Principal Legislation

  • Life Insurance Act BE 2535 1992
  • Non-Life Insurance Act 1992
  • Protection for Motor Vehicle Accident Victims Act 1992 (as amended)

Supervision
The Office of the Insurance Commission (OIC), replaced the Department of Insurance (DOI), which formed part of the Ministry of Commerce, as the independent regulatory body responsible for the life and non-life insurance sectors from 1 September 2007. The local non-life insurance association is the General Insurance Association (GIA) and the Thai Life Assurance Association (TLAA) represents life insurer's interests.

Admitted / Non-admitted
Unauthorised insurers cannot carry on insurance activity in Thailand. At the same time, there is nothing in the law which indicates that insurance must be purchased from locally authorised insurers. This is generally interpreted to mean that insurers can issue policies from abroad but only provided no local intermediary is involved and the non-admitted insurer does not solicit the business.

Compulsory Classes

  • Motor third party bodily injury.
  • Aviation liability.
  • Workers' compensation (state scheme).
  • Personal accident insurance for boat passengers.
  • Worksite inspectors' liability.
  • Liability for transportation of hazardous substances.

State Involvement
There are no state reinsurance companies.

Tariff Classes
Most classes of non-life insurance are subject to tariffs, some of which are advisory, with minimum and maximum rates, but the tariffs are invariably ignored.

Life insurers are obliged to use the Thai Mortality Table 1997 with assumed interest rates regulated at between 2% and 6%. A new Thai Mortality Table (2008) was introduced from 1 July 2011.

Premium Taxes and Charges
All non-life excluding marine cargo exports and group PA are subject to 7% VAT. Life policies are subject to stamp duty of THB 20 per policy while on non-life policies is 0.4%. Personal accident policies attract a special business tax of 2.75%.

Policy Language
Thai is the official language for policies although foreign language wordings are also in use (English).

Non-Life (P&C) Insurance Market

Long-awaited legislation to bring in modest reforms to the insurance sector, including calculation of required capitalisation based on risk-based capital (RBC), establishment of a policyholders' protection fund and requiring all insurance companies to transform into public companies within five years was approved in 2008 by way of the Non-Life Insurance Act No 2, and the RBC system was finally implemented in 2011.

The non-life insurance sector is very crowded with more than 60 non-life companies, with the top five participants commanding a market share of just 40%. In addition to the need for industry consolidation, several issues continue to restrict development of the industry as a whole. Prospects for future growth remain good, although concerns remain regarding the country's political stability.

Reinsurance Market

Thailand has one life domestic reinsurance company and two domestic non-life reinsurers. There are no state reinsurance companies, but, by agreement, non-life companies cede a 5% quota share of all risks to the principal domestic reinsurer (excluding aviation, crop and livestock).

Distribution Channels

The non-life distribution in the Thai market is shared principally among agents, brokers and banks. Thai insurance distribution remains dominated by licensed life agency forces, though bancassurance continues to erode their market share.

Natural Hazards

The tsunami that struck on 26 December 2004 showed that Thailand is exposed to the effects of the seismic events in nearby regions, even though it is not in a seismic zone itself. Windstorm is not considered a major cause of concern as high winds are rare. Flood is by far the major natural hazard exposure in Thailand, and large areas of the country are subject to regular flooding as a result of monsoon rains.