Insurance Regulatory and Development Authority (Irda) today approved the transfer of shares from existing shareholders of MetLife Insurance to Punjab National Bank (PNB) under a deal between PNB and MetLife. Irda has approved the transfer on the condition that shares held by PNB would be locked-in for five years from the date of transfer.
Irda, in consultation with a Consultative Committee has directed MetLife to desist from allotting any further shares to IGE India Limited, enhance capital with a view to strengthen solvency position by 31 March 2013 and comply with Irda regulations on bancassurance and corporate agency. Faridabad Investment Company is a shareholder in MetLife Insurance, which later merged with IGE India.
Irda also noted that it was concerned with the company's solvency position which stands at 1.65 and is under its examination. It said that Jammu & Kashmir Bank was presently not in a position to inject capital in the insurance firm as RBI has not relaxed its stipulations on Jammu & Kashmir Bank requiring it to exit from the insurance venture. "The Authority is mot fully satisfied with the financial due diligence of IGE and has concerns on its ability to meet its commitments towards future capital calls of the insurance company," said Irda.
In September, Irda approved a proposal for inducting PNB as a shareholder subject to certain conditions inter alia on appointment of Directors on the Board of the insurer by PNB. The regulator had said that other conditions included reduction in the equity stake by some of the existing shareholders and maintaining solvency margin as per the directions suggested by Irda. This transaction was pending the insurance regulator's approval for over a year as IRDA was not comfortable with the deal structure and had directed the insurance company to re-work the sale agreement with bank.
MetLife is a joint venture between Jammu & Kashmir Bank, the M Pallonji Group, the US-based MetLife International and some private investors. MetLife International holds 26% stake — the maximum foreign direct investment allowed in the insurance sector — and Indian shareholders own the remaining 74%.
Irda also pointed that keeping the above factors in mind, MetLife may be required to cease insurance operations in India in case the issues relating to shareholding structure and financial stability are not suitably addressed. "Such a situation would not be in public interest and may also result in jeopardizing protection of the interests of the policyholder," the regulator said.