Regulatory changes in the insurance business are likely to compel mergers and acquisitions (M&A) among insurers, says an expert.
Under the Office of Insurance Commission (OIC) amendment of the risk-based capital (RBC) framework in Thailand, there is an increasing trend of consolidation among small insurers, particularly non-life insurance companies.
Paul Melody, managing director of the Asia-Pacific life insurance practice at Tower Watson, said Thailand had 64 non-life insurance firms and 23-24 life insurance companies.
He said it was quite a challenge for small insurers to comply with the tightened RBC requirement but the increase in M&A would strengthen the entire industry in the long term. The banking sector underwent a similar experience after the 1997 financial crisis.
Tower Watson, which advises the OIC, established a presence in Thailand in 1995 when the insurance market opened up.
Mr Melody said foreign investors had expressed interest in investing in Thailand following greater opportunities. M&A, partnerships, distribution network models and bancassurance are options for overseas operators to invest in both life and non-life insurance business.
"There are some deals going on," he said.
However, political factors remain a key concern for foreign investors. "If there is political stability, government transparency and a stable economy, it would certainly attract foreign investments regardless of whether it is a military government," Mr Melody said.
Alan Merten, director of the Asia-Pacific insurance consulting practice at Tower Watson, said the launch of the Asean Economic Community in 2015 would draw foreign investors to Thailand and the region.
Thailand has strong potential and could become an insurance hub, he said.
Liberalisation of insurance business will be the next phase in Thailand in line with the regional trend.
"And this liberalisation will also boost activities including M&A from foreign investors," Mr Merten said.
It will take longer for insurance business to develop in countries such as Cambodia, Laos, Myanmar and Vietnam.