The amalgamation or transfer of interests in Nigerian insurance companies(usually by way of mergers or acquisitions) follows a unique procedure as outlined by the Insurance Act which slightly differs from the process outlined in the Companies and Allied Matters Act (CAMA) 2020 and which we will be looking at in this article.
This article will be mainly focused on the areas of :-
– The provisions of the act on amalgamations and transfers.
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– Documents to be deposited with the National Insurance Commission (NAICOM) after amalgamation or transfer.
– Winding-up petitions under the Insurance Act.
– Voluntary winding-up under the act.
What does the Insurance Act say about amalgamations and transfers of insurers?
– The act provides that no insurer shall –
a). Amalgamate with, transfer to or require from any other insurer any insurance business or part thereof, without the approval of the Commission.
b). Without the sanction of the court :
(i). amalgamate with any other insurer carrying on life insurance business or workmen’s compensation insurance business,or
(ii). transfer to or acquire from any other insurer, any such insurance business or part thereof.
– The NAICOM may, before granting an approval under the relevant provisions of the act, call for such statements, documents and other information as shall enable it to reach a decision on the matter.
– If a class of insurance but mentioned here is intended to be amalgamated with another insurance business or where an insurer or the class of insurance business is intended to be transferred or acquired in whole or in part, the insurers concerned shall apply to the court to sanction the proposed amalgamation or transfer as the case may be.
– Before an application is made to the commission for approval or to the court to sanction any transaction under this provision, notice of intention to make the application together with a statement of the nature of the amalgamation, transfer or acquisition shall, at least 3 months before the application is made , be published in at least 5 national newspapers served on the Commission.
What are the documents to be deposited with NAICOM after amalgamation or transfer?
– Within 3 months after the date of completion of the amalgamation, transfer or acquisition of insurance business, the insurer carrying on the amalgamated business or to whom the business is transferred or by whom the business is acquired as the case may be, shall furnish in duplicate to the commission :-
a). Certified copies of the agreement or deed under which the amalgamation, transfer or acquisition had been effected.
b). A certified copy of the agreement or deed under which the amalgamation, transfer or acquisition had been effected.
c). A certified copy of the actuarial or other reports upon which the agreement or deed was founded.
d). A declaration signed by each of the insurers concerned –
(i). that to the best of their knowledge and belief, every payment made or to be made to any person on account of the amalgamation or transfer is therein fully set forth, and
(ii). that no other payments beyond those set forth have been made either in money, policies, securities or other valuable consideration by or with the knowledge of any of the parties to the amalgamation or transfer.
What are the provisions of the act on winding up petitions involving insurers?
– A petition for the winding up of an insurer may be presented to the court either :-
a). Subject to the approval of NAICOM by not less than 50 policy holders, each of whom holds a policy that had been in force for not less than 3 years on the grounds set by CAMA 2020.
b). By NAICOM on any of the following grounds, that is :-
(i). that the registration of the insurer has been cancelled in accordance with the act;
(ii). that the insurance company cannot be revived despite the intervention of NAICOM.
– The provisions of CAMA 2020 shall have effect, subject to this Insurance Act, as if the petition was presented under CAMA 2020.
– In all cases NAICOM shall monitor the winding up processes.
What is the priority ranking of debts to be settled upon the winding up of an insurer under the Insurance Act?
– Notwithstanding the provisions of CAMA 2020 or any law, the following priority list shall be followed in settling debts owed by the company –
a). Liquidated fees
b). Secured creditors
c). Policy holders
d). Other creditors
e). Staff
f). Shareholders and Directors
What are the provisions of the Insurance Act on voluntary winding up of insurers?
– Notwithstanding the provisions of CAMA, no insurer which transacts life insurance business shall voluntarily wind-up its business except for the purpose of effecting an amalgamation, transfer or acquisition under this Act.