The Insurance Regulatory and Development Authority of India (IRDAI) has rejected the proposed merger of Max Life Insurance and HDFC Standard Life, prompting the two firms to explore other options.
According to IRDAI, the structure of the merger proposal is not compliant with Section 35 of the country’s Insurance Act, which prohibits the merger of an insurer and a non-insurance firm. In November 2016, the IRDAI flagged the deal and summoned representatives from the two companies to work out the deal.
The complicated proposal involved Max Life merging with its parent company Max Finance Services, then afterwards, the life insurance business will be de-merged from Max Financial and transferred into HDFC Life, which will hold a majority stake in the resulting entity.
Both Max and HDFC Life issued separate statements announcing that IRDAI affirmed its initial decision to disallow the transaction. The insurers both said that they remain committed to the merger and are looking at other options.
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