IRDAI issued an Order bearing reference number: IRDAI/F&I/ORD/MISC/64/04/2024 dated April 04, 2024, in the matter of M/s. Edelweiss Tokio Life Insurance Company Ltd. (“ETLIC or Insurer”) .
Background
1. During the evaluation of shareholding patterns of ETLIC from October to December 2021, it was discovered by IRDAI that their net worth as of December 31, 2021, included INR 200 Crore from share application money received without prior approval.
2. Subsequently, in January 2022, the Indian Promoter of ETLIC, Edelweiss Financial Services Limited (EFSL), subscribed to Twenty Crore additional equity shares amounting to INR 200 Crore through a rights issue, increasing the shareholding of EFSL from 51% to 66%.
3. Amidst these developments, ETLIC sought to reclassify its shareholders, particularly Tokio Marine and Nichido Fire Insurance Company Ltd. (TM), from foreign promoters to foreign direct investors.
4. At this stage, IRDAI noted the expiration of the Joint Venture Agreement between EFSL and TM in November 2021 and raised concerns regarding the issuance of additional rights shares of ETLIC in September 2022, resulting in further changes to the shareholding of EFSL, which increased to 75.1%.
5. Following an examination of ETLIC’s submissions, the Authority issued a Show Cause Notice (SCN) to the insurer on January 18, 2024.
The observations/ issues raised by the Authority and decisions on these observations are summarized hereunder for reference:
Charge No
Violation
Observations of the Authority
Decision of the Authority
1
Violation of Regulation 6(10) of IRDAI (Registration of Indian Insurance Companies) Regulations, 2022 (Erstwhile Regulation – Reg. 3(a) of IRDAI (Transfer of Equity Shares of Insurance Companies) Regulations, 2015) read with the provisions of Section 6A (4) (b) of Insurance Act, 1938.
Transfer of Shares: No registration of transfer of shares or issue of equity capital of an insurance company, which would result in change in shareholding, shall be made, where:
- after the transfer, the total paid-up holding of the transferee in the shares of the insurance company is likely to exceed five percent of its paid-up capital; or
- the Nominal value of shares intended to be transferred by an individual, firm, group, constituents of a group, or body corporate under same management, jointly or severally exceeds one percent of the paid-up equity capital of the insurance company.
Unless the prior approval of the Authority has been obtained for the said transfer in the manner as specified in Schedule 2 of these Regulations.
The insurer has not obtained prior approval from the Authority concerning the transfer of shares in favour of EFSL to the extent of 75.1%.
The Authority has imposed a penalty of Rs. 20 Lakh for the violation.
2
Section 26 of the Insurance Act, 1938
Whenever any alteration occurs or is made which affects any of the matters which are required under the provisions of sub-section (2) of section 3 to accompany an application by an insurer for registration, the insurer shall forthwith furnish to the Authority full particulars of such alteration. All such particulars shall be authenticated in the manner required by that sub-section for the authentication of the matters therein referred to, and where the alteration affects the assured rates, advantages, terms and conditions offered in connection with life insurance policies, the actuarial certificate referred to in clause (f) of the said sub-section shall accompany the particulars of the alteration.
The insurer has mentioned the terms of the Agreement in their part of the submission made at the time of Registration and the same was considered by the Authority.
Insurers have been advised to update the Authority on any such alterations that are material in nature.
The Authority has directed the Insurer to:
1. Remit the penalty of Rs. 20,00,000/- (Rupees Twenty Lakh only) within a period of 45 days from receipt of this Order.
2. Advisory to ETLIC to update the Authority on any such alterations that are material in nature.
A copy of the order is attached for your ready reference.
Source category: IRDAI
Attachments
- /2024/386_Final_Order_in_the_matter_of_Edelweiss_Tokio_Life_Insurance_Company_Ltd.pdf
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