India: Amalgamations And Transfers In The Insurance Sector

The insurance sector has, in the recent years, been abuzz with the news of new players looking to acquire stakes in insurance companies and insurance intermediaries. While such restructuring involves a complicated process in itself, the approval requirements stipulated by the Insurance Regulatory and Development Authority of India (IRDAI) additionally lengthen the process.

Amalgamations for Insurers

In terms of Insurers, the Insurance Act 1938 (Insurance Act) provides for the manner in which Insurers may carry out amalgamation and transfer of insurance business. §35, §36 and §37 of the Insurance Act prescribe the procedure for obtaining the approval of the IRDAI for amalgamation and transfer of insurance business in the following terms.

The parties are required to prepare a scheme which sets out the agreement under which the transfer or amalgamation is proposed to be effected, and containing such further provisions as may be necessary for giving effect to the scheme. Two months prior to making an application to the IRDAI for the approval of such scheme, a notice of intention to make such application is required to be sent to the IRDAI, along with a statement of the nature of transaction and the reasons thereof and four certified copies of the following documents:

  • a draft of the agreement or deed under which it is proposed to effect the amalgamation or transfer;
  • balance sheets in respect of the insurance business of each of the Insurers concerned in such amalgamation or transfer;
  • a report on the proposed amalgamation or transfer, prepared by an independent actuary who has never been professionally connected with any of the parties concerned in the amalgamation or transfer in the preceding five years;
  • actuarial reports and abstracts in respect of the insurance business of each of the Insurers;
  • any other reports on which the scheme of amalgamation or transfer was founded.

The process followed for approval is as follows:

  1. During the two month pendency period, the above listed documents are also required to be kept open for inspection by the members and policyholders at the principal and branch offices of the Insurers concerned;
  1. Upon receipt of the application for grant of approval for the scheme, the IRDAI will issue a notice of the application to be given to the policyholders of the Insurer concerned and shall cause  a statement of the terms and nature of the amalgamation or transfer to be published in such manner and for such period as the IRDAI may direct;
  1. After hearing the directors and considering the objections of the policyholders and any other persons who may be entitled to be heard, the IRDAI, upon being satisfied that no substantial objection to the arrangement has been established, may approve the scheme and make such consequential orders as are necessary to give effect to the arrangement;
  1. Once the scheme is approved by the IRDAI, the insurance business of an Insurer may be transferred to, or amalgamated, or merged with the insurance business of the other Insurer;
  1. Once the amalgamation or transfer of business if effected, the Insurer carrying on the amalgamated business or the Insurer to whom the business is transferred is bound to provide IRDAI with the duplicate copies of the following document within a three month period:
  • a certified copy of the scheme, agreement or deed under which the amalgamation or transfer has been effected;
  • a declaration signed by the chairman and the principal officer that to the best of their belief every payment to any person on account of the amalgamation or transfer is therein fully set forth and that no other payments are to be made.

The Insurance Act, therefore, lays down, the manner in which approval of the IRDAI may be sought, the documents required as well as the pre and post approval actions required to be complied with by the parties.

In addition to the foregoing, pursuant to the powers conferred under §37A of the Insurance Act, the IRDAI also has the power to prepare a scheme of amalgamation of an Insurer with another Insurer, where the IRDAI is satisfied that such an amalgamation is necessary in the public interest, in the interest of policyholders, in order to secure the proper management of an Insurer or in the interest of insurance business of the country as a whole.

It is relevant to note that transfer of amalgamation of business of an Insurer without the approval of the IRDAI is also a ground for suspension of certificate of an Insurer as issued by the IRDAI.

Amalgamations for Insurance Intermediaries

While an organised procedure for regulating the amalgamation or transfer of business of Insurers has been set out, the regulations governing the amalgamation or transfer of business of insurance intermediaries remain scattered and, in some cases, silent.

For instance, even though R8(d) of the IRDAI (Insurance Web Aggregators) Regulations 2017 is titled 'Transfer of Ownership', the regulation itself does not envisage exhaustive provisions governing the amalgamation or transfer of undertaking and merely stipulates the conditions for the approval of the transfer of ownership of the shares of a web aggregator to another individual/entity, particularly with respect to beneficial ownership, ceiling on foreign investments and the ceiling on shareholding of Indian investors.

At the same time, it is also interesting to note that the IRDAI (Registration of Corporate Agents) Regulations 2015 as well as the IRDAI (Insurance Surveyors and Loss Assessors) Regulations 2015 (as amended), do not stipulate express provisions to govern the transfer of shares. As a result of such fragmentation of the regulatory framework governing insurance intermediaries, there is no uniform guidance for insurance intermediaries on the process of amalgamation or transfer of business.

However, a welcome change in this regard has been introduced under the R41 of the IRDAI (Insurance Brokers) Regulations 2018 (Brokers Regulations) titled 'Amalgamation and Transfer of Business' which prescribes that approval of the IRDAI is required to be obtained for every scheme of amalgamation or transfer of business of an insurance broker before it can be implemented. In this regard, R41 of the Brokers Regulations further clarifies that such approval is required irrespective of whether the transferor continues to act as an insurance broker subsequent to the transfer of business, or whether the transfer of business results in the voluntary surrender of the certificate of registration by the transferor. The process for obtaining such approval from the IRDAI is stipulated under Schedule II Form Y of the Brokers Regulations in the following terms:

  1. Every proposal for implementation of the scheme of amalgamation or  of transfer of business is required to be jointly submitted by the insurance broker/insurance intermediary to the IRDAI along with the following documents:
  • draft of the agreement or deed under which the transfer of business is proposed to be effected;
  • a synopsis of the proposed transaction, and the terms on which such transaction has been contemplated;
  • audited balance sheets and the latest quarter's un-audited financial statements of the parties to the transaction;
  • a report on compliance with the applicable laws, including, but not restricted to, the Competition Act 2002 and the employment laws;
  • a report on the manner in which the interest of the policyholders will be protected;
  • an undertaking from the transferor that it shall cease to undertake insurance broking activity in the line(s) of insurance proposed to be transferred under the scheme;
  • any other undertaking as required by the IRDAI.
  1. The IRDAI is required to approve the scheme as expeditiously as possible from the day of receipt of application of approval if it is satisfied that the scheme is in compliance with all applicable laws and regulations and that the scheme is in the best interests of the policyholders;
  1. The IRDAI may also issue such directions as it deems fit, taking into account the facts and circumstances of each case, its regulatory objectives, the interests of policyholders and orderly growth of the insurance sector, in relation to any sequencing of measures involved in the scheme being approved by it;
  1. Once the scheme is approved by the IRDAI, the transfer of business will be effective from the date specified by the IRDAI in its final approval.

The Brokers Regulations, therefore, prescribe the manner in which approval may be sought from the IRDAI, including the documents necessary for the process. The Brokers Regulations also confer discretionary power upon the IRDAI to issue directions with respect to the amalgamation process in light of the facts and circumstances of each case, its regulatory objectives, the interests of policyholders and the orderly growth of the insurance sector. However, the Brokers Regulations do not specify the post approval actions or the manner in which an insurance broker may contest the decision of the IRDAI regarding its application for approval. Nevertheless, while the stipulations in the Brokers Regulations may not be exhaustive, it definitely brings clarity to the process of amalgamation and transfer of business of insurance brokers.

Even with the amendments introduced to the Brokers Regulations, the ambiguity regarding the process of amalgamation and transfer of business with respect to other insurance intermediaries persists. Therefore, there is a growing need for the extant regulations governing the specific forms of insurance intermediaries to be amended and for the norms on amalgamation to be spelled out, thereby dispelling uncertainty and providing a defined process for the market players.

For further information on this topic please contact Tuli & Co 

Tel T +91 11 4593 4000, fax F +91 11 4593 4001 or email

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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Priya Misra
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