IRDA issues final norms for non-life insurance M&As

The Insurance Regulatory and Development Authority (IRDA) on Wednesday issued its final regulatory guidelines on mergers and acquisitions for the non-life or general insurance companies.

Among other things, insurance companies looking at M&As would now have to take the approval of the relevant high court or tribunal before approaching IRDA for final approval.

IRDA has also reserved the right to impose additional conditions prior to court approvals, a change from the draft where the regulator had kept the final approval to itself after the court approval.

The regulator has stipulated that the solvency margins of the merged entity should not be less than the stipulated solvency norms, whatever these may be at the time of the merger. Currently, the solvency ratio of general insurers stands at around 120 per cent.

The insurance regulator has also stipulated in the rules, which were notified through a government gazette, that if it feels necessary it may conduct an actuarial valuation of the merged entity, including assets and liabilities and solvency positions.

However, these norms, which have come into immediate effect, will apply only to private sector insurers and not to the public sector once. Thus New India Assurance, Oriental Insurance, United Insurance and National Insurance Co have been left out of the ambit of the new order.