Mergers in general insurance sector: soon to be a reality

On 9 February the Insurance Regulatory and Development Authority (IRDA) released an exposure draft of an order on Schemes of Arrangement and Transfers of Non-Life Insurance Business. In it the Indian insurance sector regulator sets out directions intended to cover all types of transfers of general insurance business including specifically, court-driven schemes of arrangements and amalgamations of general insurers under the Companies Act, 1956.

In this month’s column we take a brief look at the process for transfer of business outlined in the exposure draft and some of the questions and concerns surrounding it.

Filling the void

The covering letter to the exposure draft states that it has been introduced since there is no explicit statutory framework under the Insurance Act, 1938, for amalgamation and transfer of non-life insurance companies. This gap, however, had previously been recognized by the legislative drafting committee and is sought to be remedied by the impending Insurance Laws (Amendment) Bill, 2008. This bill proposes to extend the statutory provision under section 35 of the Insurance Act, which is currently applicable solely to life insurance companies, to all insurance companies. Thereby these provisions will be extended to general insurers as well.

Saket Shukla is a partner at the Delhi office of Phoenix Legal. He has extensive experience in advising on Indian insurance regulatory and M&A matters. Arun Madhu is a senior associate at the firm’s Mumbai office. He advises insurance sector clients on a regular basis. They can be reached at saket.shukla@phoenixlegal.in and arun.madhu@phoenixlegal.in.