Irda issues merger norms for private general insurers

MUMBAI: Irda has announced the norms for mergers of general insurance companies . However, these norms, which have come into immediate effect, will not apply to the four public sector insurers. The new set of norms will be applicable only to private companies, leaving out New India Assurance , Oriental Insurance, United Insurance and National Insurance Company . Irda has 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.

Irda in the final merger norms has stipulated that the solvency margins of the merged entity should not be less than the stipulated solvency norms, whatever it be at the time of the merger. Currently, the solvency ratio of general insurers stands at around 120%. The insurance regulator has also stipulated in the rules, which were notified through a government gazette on Wednesday , that if it feels necessary it may conduct an actuarial valuation of the merged entity, including assets & liabilities and solvency positions.

The merger norms comes 10 years after opening up of the insurance sector and most of the general insurers are suffering heavy losses from sectors such as health and motor. The norms also have been framed to protect the interest of policyholders, and all policyholders of the companies being merged need to be informed of the merger details . The merging companies shall also ensure that policyholders of the transferor entity are migrated in a manner which ensures that their existing policies are continued to be serviced by the transferee entity on terms and conditions, no less favourable than those existing prior to the merger.