News: Muangthai life insurance granted license in Myanmar
Muangthai Life Insurance is the 4th foreign life insurance company (and the first from Thailand) which has been granted a licence to operate its representative office in Myanmar.
The Myanmar government plans to allow a certain level of foreign equity ownership in insurance companies and banks in the year 2015. At present, more than 10 foreign insurance companies have opened their representative offices in Myanmar.
Note: Presently foreign insurance company is not allowed to open a branch or to hold shares in any local insurance companies in Myanmar. Nevertheless, the Myanmar Ministry of Finance and Revenue has the policy to liberalize the financial sectors and to allow foreign investors to hold shares in insurance companies in Myanmar from the end of 2015. Thus the holding of a license to open the representative office in Myanmar at this stage brings the good opportunities to foreign insurance company who wishes to explore the investment in Myanmar in the near future, to know the local market and the local insurance law and practice.
Commentary: Major insurance problems encountered in Project Finance Deals
Stefano Gatti, in his book, Project Finance in Theory and Practice, (2008, Academic Press), wrote briefly about a few major insurance-related problems encountered in project finance deals which may be of interest to our readers. Examples of major problems from the lender’s standpoint include:
- The pricing of the insurance package from the very beginning of the project.
- The possibility of sponsors not renewing, or reducing, the insurance program (e.g. reduction of claim limit or maximum sum insurable etc.).
- The possibility of insurers cancelling policies if certain conditions should arise (e.g. an unfavourable claims/premium ratio).
- The possibility of sponsors not paying for insurance coverage, or failing to utilize any claim reimbursements to reconstruct the works.
- The possibility of insurers claiming that they were not correctly informed of the project risks when these were underwritten, and that they therefore seek to reduce or cancel the extent of contractual guarantees.
Legal grounds for refusal of insurance claims under Thai law
No Insurable Interest
According to Section 863 of the Civil and Commercial Code of Thailand (CCC), a contract of insurance is not binding on the parties unless the assured has an interest in the asset or event insured against.
A common example is where the insured does not have any ownership or possessory right on the property insured, the insurer is able to reject the claim since the insured is not affected in the event of loss or damage.
At the time of applying for, or renewing, the insurance policy, the insured is under a duty to disclose relevant facts and information. This disclosure would have a bearing on the insurer, on whether to raise the premium or to refuse to enter into the contract.
If the insured knowingly omits to disclose or provides false statements in regard to such facts, the aforesaid contract shall be voidable and the insurer may be able to reject the claim on grounds of non-disclosure (Section 865 of the CCC).
However, such right of avoidance will extinguish if it is not exercised within one month from the time when the insurer has knowledge of the ground of avoidance, or within five years from the date of the contract (Paragraph 2 of Section 865, CCC).
Failure of Premium Payment
The Thai Supreme Court has previously ruled that paying insurance premium was a reciprocal obligation of the insured according to Section 369 of the CCC. If the insured had defaulted in payment of the insurance premium, the insured shall be deprived of the right to claim damages. In the case where compensation has already been paid to the insured, the insurer is entitled to recover such compensation.
When a loss occurs from an insured risk, the assured or the beneficiary must give notice thereof to the insurer without delay (Section 881 of the CCC).
However, the consequence of late notification is not expressly provided for. The court has rendered judgment that even though the insured had failed to comply with his duty to promptly notify the insurer upon discovery of the loss, the insurer is not discharged from his liability to compensate the victims. However, the insurer has the right to claim compensation for any damage suffered thereby.
Notwithstanding the above, the insurer may refuse to pay compensation on account of late notification, if such ground is expressly provided for in the insurance contract.