Insurance mergers and acquisitions boost IRDAI’s revenue, claims managers say

Whether or not the insurance mergers and acquisitions benefit the acquiring company, it certainly increases the revenues of the Insurance Regulatory and Development Authority of India (IRDAI), a senior official said.

For the year ended March 31, 2020, IRDAI had earned around Rs 7.19 crore as a merger fee, the official said not wanting to be cited. IANS.

For the current year, the only mega deal that IRDAI has to give the green light is the merger of Exide Life Insurance with HDFC Life Insurance.

To a question asked by IANS, HDFC Life Insurance MD and CEO Vibha Padalkar, said on Friday that requests had been sent to IRDAI and the Competition Commission of India (ICC) for their approval to merge Exide Life Insurance.

Asked about the amount of transaction processing / merger fees paid to IRDAI, she said the company was not at this stage yet.

The general insurance industry experienced sales / purchases of equity interests last year. Paytm acquired Raheja QBE, HDFC Ergo acquired Apollo Munich, Sachin Bansal acquired DHFL General Insurance and Bharti Axa General was acquired by ICICI Lombard.

IRDAI collects a merger fee of 1 / 10th of one percent of the gross direct premium written in India by the transaction entities in the fiscal year preceding the fiscal year in which the claim is filed with it, subject to a minimum of Rs 50 lakh and a maximum of Rs 5 crore.

The main income of IRDAI is the annual license renewal fees of insurers.

According to IRDAI, insurers pay a license renewal fee of 1 / 20th of one percent of the gross direct premium written in India, subject to a minimum of Rs 500,000 and a maximum of Rs 10 crore .

IRDAI oversees insurers including their financial health, market activities and others.

Asked about the rationale for imposing merger fees on transaction companies in addition to license renewal fees, senior IRDAI officials were left with no valid answers.

“If IRDAI’s oversight is correct, the processing of merger transactions should be smooth and fast,” said a senior industry official. IANS preferring anonymity.

Another senior industry official, unwilling to be quoted, said IANS: “IRDAI’s handling of the merger transaction is a complicated business. The regulator needs to see the solvency of the companies involved, actuarial calculations, market dominance after the merger and other aspects.”

For FY20, IRDAI had earned an amount of around Rs 165 crore as license fees from life / non-life and reinsurers.

With around 200 employees, IRDAI had recorded a total income of around Rs 268 crore in FY20 and the excess of income over expenses was a whopping Rs 102.44 crore.

IRDAI’s balance sheet assets for FY20 are approximately Rs 1,805 crore, of which Rs 1,644.59 consists of fixed investments / deposits, current assets (cash and bank balances). , loans and advances, and others), added the official.

(With IANS entries)

Posted on: Saturday October 23, 2021 6:35 PM IST