IRDA proposes a draft for the framework of mergers and acquisitions for non-life Insurers
Mumbai: IRDA today proposed a draft for the framework of amalgamation and transfer of non life insurance companies and to incorporate the same in the Insurance Amendment Bill, 2008 in line with life insurance companies. The regulator has also invited suggestions based on which the authority would finalize the framework shortly. The General Insurance business grew 22 per cent in the first three quarters of the current fiscal collecting premium of Rs. 30,813 crore during April-December 2010, compared to Rs. 25,172 crore for the same period last year.
The scheme of arrangement would require three major approvals in order to start underwriting the insurance business. The first is an In-principle approval by the IRDA where the regulator should be convinced that the merger would be in the best interest of the insurance sector. The second approval is from various bodies/authorities such as High Courts, Foreign Investment Promotion Board and RBI and lastly a final approval is to be secured from the IRDA for the new arrangement.
In order to protect the interest of policy holders, the draft proposal requires the transacting parties to ensure that policyholders of the transferor entity are migrated with the same terms and conditions which they enjoyed in their earlier policy prior to the merger. An exit option is also to be given to the policyholders of the transferor entity.
The draft proposal further encompasses aspects relating to rationalization and streamlining of products, impact on distribution channels/intermediaries, accounting and valuation of transacting entities. The draft proposal also requires the applicants to file financial condition report, IBNR report and solvency position of the transferee entity.