Irda issues guidelines for insurance firms merger
The Insurance Regulatory and Development Authority (Irda) today released regulatory guidelines for mergers and acquisitions (M&As) for non-life insurance companies.
Insurance companies looking for mergers would now have to take the approval of the relevant high court or tribunal before securing the final nod from the insurance regulator. The solvency margin of the merged entity would also have to meet regulatory requirements.
In February, when the regulator had released the draft guidelines for mergers and acquisitions, general insurance companies had raised concerns on the court approval clause. “Under the current guidelines, Irda would not be able to override the court ruling. Hence, it is not ideal. Being the regulator, it should have complete authority like it has over mergers of life insurance companies,” said a senior official of a general insurance company.
Apart from court approval, insurers would also be required to seek the approval of the Reserve Bank of India (RBI). In case a foreign joint venture partner is involved, the Foreign Investment Promotion Board’s approval would also be needed.
The final guidelines address another key issue — that of informing all policyholders about the merger proposal. The regulator has mandated that after securing the final approval for the merger, the insurers would have to publish the merger notice in at least one national newspaper.