On 5 February 2013, the Cabinet approved the resolution regarding the proposal of the Non-Life Insurance Bill and the Life Insurance Bill for amendment of the Non-Life Insurance Act B.E. 2535 (1992) and Life Insurance Act B.E. 2535 (1992) (the “Bills”) to the House of Representatives for deliberation as an urgent matter. On 21 March 2013, the House of Representatives passed the resolution to accept the principle of the Bills, which are currently under consideration of the Ad-hoc Committee.
The Office of Insurance Commission (the “OIC”) passed the Bills for the purpose of providing additional protection of insured persons and creditors entitled to receive repayment of debts incurred in the taking of insurance in the event an insurance company has its Insurance Business License revoked or is ordered to cease operations. The long-term goal of the Bills is to also strengthen the insurance business market.
Since the Bills are virtually identical in terms of detail and principle, the main points of the Bills can be summarized as follows:
- To revoke the condition regarding shareholding by juristic persons in an insurance company as a solution in the event that an insurance company cannot find juristic persons that are legitimately qualified shareholders.
Many insurance companies have been disqualified under the current insurance act due to the fact that their juristic shareholders were not Thai nationals. The Bills, therefore, in order to strengthen the insurance business of Thailand, propose that no less than seventy-five percent (75%) of the total number of voting shares of the insurance company that have been sold must be held by Thai nationals, without stipulating the condition regarding shareholding by juristic persons in any tier. The Bills continue to retain the previous provisions authorizing an insurance company to lodge an application for increase of the ratio of shareholding of non-Thai nationals up to forty-nine percent (49%) of the total number of voting shares that have been sold, and to increase the ratio of non-Thai national directors to be not less than one-half of the total number of directors if deemed reasonable and appropriate.
The Bills also grant a relaxation for an insurance company to lodge an application for the increase of the ratio of shareholding of non-Thai nationals to more than forty-nine percent (49%) of the total number of voting shares that have been sold, and to increase the ratio of non-Thai national directors to be more than one-half of the total number of directors in the event the insurance company has a justifiable reason in regard to improving its business condition, or to increase the stability of the insurance company or the insurance business. The conditions for granting relaxation shall be subsequently prescribed by the OIC in the Government Gazette.
- To stipulate the timeframe and the process of a liquidator in the event an insurance company has its Insurance Business License revoked.
A liquidator must inform insured persons who are creditors under the insurance policies to send a debt collection letter to the liquidator in order to allow the liquidator to determine the number of creditors and the amount of debt. The liquidator shall use a security deposit and an insurance reserve received from the Registrar to provide payment to undisputed creditors in accordance to their respective portions of the total debts prior to the commencement of the bankruptcy proceedings against the relevant insurance company. Moreover, a liquidator must issue a certificate to creditors who can then use such certificate to receive repayment from the Insurance Funds. This provision is aimed at decreasing the burden of Insurance Funds in loaning money for repayment of debts.
- To enable the Non-Life Insurance Funds or the Life Insurance Funds to loan money or issue financial instruments so that such Funds shall have sufficient money to pay for the insured who are creditors entitled to receive repayment of debts incurred in the taking of insurance in place of the insurance company that has its Insurance Business license revoked. The Funds are empowered to perform their duty as liquidator with appointment of the OIC.
- To increase the penalty for a director, manager, person authorized to act on behalf of the insurance company, consultant, or officer of the company who fails to deliver books of accounts or documents of the insurance company when an insurance company has its Insurance Business License revoked. The person who violates such provision shall be liable to imprisonment of up to six months, or a fine of up to 50,000 baht, or both.
During consideration of the Ad-hoc Committee which is composed of the House of Representatives and specialists, the Bills remain open to amendment. When the Ad-hoc Committee is finished considering the Bills, such Bills will be proposed to the Speaker of the House in order to be subsequently considered in Parliament and Senate meetings.