HDFC Life-Max Life merger faces yet another regulatory hurdle

In yet another obstacle for the merger between HDFC Life and Max Life, the country’s insurance regulator has sought a legal review of the proposed structure of the combine, sources have told CNBC-TV18.

CNBC-TV18’s Yash Jain reports that the Insurance Regulatory and Development Authority has written to the Union Law Ministry and Attorney General of India Mukul Rohatgi seeking their opinion on the matter.

Max Financial Services and HDFC had announced the merger of Max Life with HDFC Life last June. But following reservations expressed by the insurance regulator in November last year, the merger has been stuck in regulatory issues.IRDAI had taken issue with the manner in which the two insurers were proposed to be amalgamated, with particular reference to Section 35 of the Insurance Act 1938, which looks into the terms of merger of insurance companies. The insurers have been in constant contact with the regulator, explaining that the deal structure to the regulator in December last year and claimed it wasn't in violation of merger laws. As per Section 35 of the Insurance Act 1938, no life insurance business of an insurer can be transferred to any person, or transferred to or amalgamated with the life insurance business of any other insurer, except in accordance with a scheme prepared under this Section and approved by the Authority.  Officials close to the development said that there were some differences in the interpretation of this particular provision. Since the deal involved Max Life merging into the listed Max Financial Services which would in turn merge with HDFC Life, there was a view that this meant the merger of one insurance business with one non-life insurance business. Even if IRDA gives the green light, the insurers will have to get a nod from other regulatory authorities.