IRDA (SCHEME OF AMALGAMATION AND TRANSFER OF LIFE INSURANCE BUSINESS) REGULATIONS, 2013 AND IRDA (SCHEME OF AMALGAMATION AND TRANSFER OF GENERAL INSURANCE BUSINESS REGULATIONS, 2011)

IRDA (SCHEME OF AMALGAMATION AND TRANSFER OF LIFE INSURANCE BUSINESS) REGULATIONS, 2013 AND IRDA (SCHEME OF AMALGAMATION AND TRANSFER OF GENERAL INSURANCE BUSINESS REGULATIONS, 2011) :

Under the provisions of the Act, a Scheme of amalgamation or transfer is possible only between two life insurance companies or two general insurance companies, It is not possible for a life insurance company to be acquired by a general insurance company or vice versa, since separate insurance companies are required to be formed for transacting life and general insurance businesses.

The Regulations require submission of every proposal for implementation of proposed amalgamation to be submitted to IRDA for a prior approval alongwith the draft Scheme of amalgamation.

However, before submission of the application, notice of intention to submit the application shall be submitted one month before filing the application for approval for every proposal for implementation as above alongwith a statement on the nature of amalgamation or transfer alongwith the following documents:

(a) Draft of the agreement for the proposed amalgamation or transfer

(b) Balance Sheets of both the target insurance company and the acquiring insurance company

(c) Financial Condition Report. Solvency Statements and Incurred but not Reported (IBNR) Report of both the insurance companies

(d) Report by an Independent Actuary (who has not been connected with any of the two insurance companies during the past 3 years) on the proposed amalgamation or transfer

(e) Executive summary of the proposed amalgamation or transfer along with the terms on which the transaction has been contemplated

(f) Report on the manner in which the interests of Policyholders will be protected and the compliance with the applicable laws including the Competition Act, 2002

The financial statements shall be prepared as on the appointed date, i.e. date fixed for the purpose of giving effect to the scheme of amalgamation or transfer and

IRDA may cause an independent actuarial valuation of the insurance businesses of the transacting parties.

IRDA would then consider issue of an in-principle approval for the proposed amalgamation or transfer. Upon receipt of the in-principle approval, the transacting parties shall inform their respective Policyholders about the proposed Scheme of amalgamation or transfer as follows:

(a) Keeping the Scheme open for inspection for Policyholders at the Head office;

(b) Uploading the Scheme in the website of the transacting parties;

(c) Statement on nature and terms of amalgamation to be published in one leading National and one vernacular Newspaper and filing copies with IRDA;

(d) Informing all the Policyholders individually giving notice about the application for the proposed amalgamation or transfer.

Upon receipt of the in-principle approval from IRDA, the transacting parties would seek other legal clearances or regulatory approvals, including the following:

(a) Filing of the Scheme of arrangement, alongwith the in-principle approval of IRDA, before the relevant Court or Tribunal for confirmation of the Scheme of arrangement under Sections 391 to 394 of the Companies Act, 1956;

(b) Filing applications before the Foreign Investments Promotion Board or Reserve Bank of India for seeking necessary approvals;

(c) If the insurance companies have a foreign insurance company as a promoter who is regulated in their country of origin, necessary regulatory approvals for the proposed Scheme from the concerned regulator.

(d) Such other approvals, including the approval of Securities and Exchange Board of India or the Competition Commission of India.

Upon receipt of all the legal clearances or other regulatory approvals, the transacting parties shall submit all the other approvals to IRDA for seeking their final approval. A final approval is then considered by IRDA keeping in mind the stipulations laid down by the Court/Tribunal and other regulatory authorities and the following considerations:

(a) compliance with the solvency margin requirements after the proposed transfer

(b) compliance with other applicable laws

(d) orderly growth of the insurance industry

and shall accordingly grant the final approval.

Upon receipt of final approval from IRDA, the following are the consequences:

(a) The scheme of amalgamation and transfer shall take effect from such date as may be specified by IRDA while granting the final approval;

(b) The final approval shall be binding on all Policyholders, Creditors or employees of both the transacting parties;

(c) The assets and liabilities of the transferor insurer shall vest with the transferee insurer from the effective date of transfer;

(d) Publication in one national and one vernacular newspaper confirming completion of the process of amalgamation or transfer.

In respect of amalgamation or transfer completed between two life insurance companies, the transferee insurer shall file a certified true copy of the scheme, deed or agreement under which the amalgamation or transfer has been effected alongwith a declaration from the Chairman and the Principal Officer listing down the various payments made or to be made to any person on account of the amalgamation or transfer effected.

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