The Insurance Regulatory and Development Authority (IRDA) on Friday made it mandatory for insurers to seek prior approval in case of stake transfer to domestic entities or financial institutions and set guidelines for seeking approval.
As per an IRDA circular, the regulator will carry out the requisite due diligence of the proposed transferee or shareholder prior to grant of approval for registration of transfer of shares under the provisions of Sec. 6A(4) of the Insurance Act, 1938, and for issue of shares to the proposed transferee or shareholder.
The circular assumes significance in the light of Bharti-AXA Reliance Industries deal and Punjab National Bank proposing to pick up 30 per cent stake in the Metlife India.
The regulator would also examine various issues including the minimum lock-in period of the proposed stakeholder before granting approval. Besides, the IRDA will look into additional capital in proportion of its shareholding at periodic intervals to ensure that the insurance company is compliant with the regulatory solvency requirements.
“No registration of transfer of shares of the insurer as specified under the provisions of Sec. 6A(4) of the Insurance Act, 1938, and issue of capital which would result in change in the shareholding pattern of the insurance company, as indicated at clause A, shall be made except with the previous written approval of the Authority,” the IRDA circular said.
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