LEGAL MEASURES FOR SUPERVISION ON REINSURANCE BUSINESS OF THAI NON-LIFE INSURANCE COMPANY REINSURED BY FOREIGN REINSURES

Abstract

Reinsurance is the practice of insurers transferring portions of risk portfolios to other parties by some form of agreement to reduce the likelihood of paying a large obligation resulting from an insurance claim. In Thailand, non-life, or general, insurance, companies sign reinsurance contracts with foreign reinsurers to spread risk beyond domestic agreements with national insurers. If reinsurers reject or evade contractual indemnifying compensation, the insurer and domestic insurance market fail to ensure that insurer losses will be covered by reinsurers. This problem became evident after the damage caused by severe flooding occurred during the 2011 monsoon season in central Thailand. The year after this disaster, the Office of Insurance Commission (OIC), the regulator of Thailand's insurance industry, announced legal measures for non-life insurance businesses by foreign reinsurers. Rules, regulations, and conditions were specified for non-life insurance companies wishing to contract with foreign reinsurers. These instructions differ from those in effect in the United States, the European Union, and Singapore, which are empowered to supervise foreign reinsurers, remedies, and protection measures, as well as the domestic insurance market. These legal measures used by foreign insurers to monitor foreign insurers were studied comparatively. Suggestions to improve current Thai regulations were also developed.