Merger of insurance companies and the transfer insurance portfolios

The merging of an insurance company with another undertaking is governed by Articles 35 and 36 of Act No. 100/2016 (in Icelandic) on Insurance Activities, cf. Act No. 2/1995 (in Icelandic) on Public Limited Companies.

If insurance companies which have obtained an operating licence in Iceland request that a merger be effected through the acquisition of one or more insurance companies and their winding up, in such a manner that all the assets and liabilities will be transferred completely without liquidation proceedings, all the undertakings shall send the Financial Supervisory Authority an application, together with a draft merger agreement between the undertakings and such documentation as the Authority considers necessary, cf. Article 35 of the Act. The same shall apply if two or more insurance companies request that a merger be effected through the establishment of a new insurance company with the winding up of the undertakings without liquidation proceedings, in such a manner that all the assets and liabilities will be transferred to the new undertaking. A merger can only be approved on condition that an authorisation to transfer the insurance portfolio has been granted, cf. Article 34 of the Act.

The same applies to undertakings that carry out ancillary activities on behalf of an insurance company in accordance with Article 5 of the Act, who wish to transfer assets and liabilities in their entirety without liquidation proceedings to an insurance company.

A merger, either through acquisition or the establishment of a new undertaking, may be authorised even if one or more of the undertakings which are acquired or which are to be wound up undergo liquidation proceedings, provided that this option is limited to undertakings that have not yet begun to distribute their assets to owners.

According to Article 36 of the Act, the draft merger agreement, which must accompany an application, shall specify, among other things, how payment is to be made for shares in undertakings which terminate their insurance activities, when shares potentially used as payment shall convey the right to dividends and other privileges, what rights owners of holdings in an undertaking terminating its activities acquire in the undertaking taking over its assets and liabilities, as well as other measures that may result in changes to the owners' rights. It shall also be stated whether board members or the managing director shall enjoy specific benefits and if so what benefits.

Certified financial statements, listing the assets and liabilities of each undertaking on the date of the proposed merger, as well as the joint initial balance following the merger, shall be submitted; the statements may not be more than six months old when the decision is taken to effect the merger. The Financial Supervisory Authority may, however, authorise the use of the undertakings' annual financial statements at the end of the last financial year.

When a merger is effected through the establishment of a new undertaking, a draft of its Articles of Association shall also be submitted.  The same shall apply to any amendments, other than change of name, made to the Articles of Association of the merging undertakings.

The Financial Supervisory Authority grants authorisation for the merger. The operating licence of an undertaking or undertakings which terminate their insurance activities shall be revoked as of the date specified by the Financial Supervisory Authority and the undertaking or undertakings are no longer considered operating undertakings.

Attention is drawn to the fact that an hourly fee is charged in connection with the processing of applications for the merger or transfer of an insurance portfolio pursuant to the Act on Insurance Activities, cf. Tariff list of the Central Bank of Iceland no. 165/2023, due to projects related to financial supervision.

The transfer of the insurance portfolio of an insurance company to another insurance company, pursuant to Article 34 of the Act on Insurance Activities.

An insurance company with head offices in Iceland may transfer its insurance portfolio in part or in full to another undertaking which has been granted an operating licence in Iceland or in a Member State. The undertaking shall send the Financial Supervisory Authority an application for the transfer together with a draft agreement between the undertakings and the documentation that the Authority deems necessary. The Financial Supervisory Authority shall examine the application with regard to the interests of both undertakings and whether there is reason to expect that the transfer could harm the policy holders and the insured of the undertakings and others who have special interests at stake.  Such transfer shall be authorised only if the Financial Supervisory Authority or, if applicable, supervisory authority of the home Member State of the accepting undertaking confirms that solvency requirements will be satisfied after transfer of the portfolio.

If applicable, the Financial Supervisory Authority shall seek the approval of the receiving company's competent authority, which has three months to give its opinion. If applicable, the Financial Supervisory Authority shall also seek the approval of the competent authority of the Member State in which the insurance contracts in the insurance portfolio were concluded. The competent authority has three months to give its opinion. The absence of any response from the authorities consulted shall be considered as tacit consent

If the Financial Supervisory Authority is of the opinion that permission for the transfer should be refused, the undertakings shall be notified immediately. Alternatively, and in cases where the underwriting risk is in Iceland, cf. point 2 of the first paragraph of Article 6 of the Act, the Financial Supervisory Authority shall publish a notification of the transfer application and request written comments from policy holders, beneficiaries and others who have special interests at stake within a specified period, which shall not be less than one month.

The Financial Supervisory Authority shall grant permission for the transfer following the expiry of the three month time limit, if it concludes, considering any comments that have been submitted, that the application shall be approved.

The rights and obligations of policy holders, beneficiaries and others under insurance contracts automatically retain their validity upon transfer. Policy holders may cancel insurance contracts that are part of a transferred portfolio from the date on which the transfer of the portfolio takes place, provided that they notify the insurance company thereof in writing within one month of the date of transfer.

When an insurance company with head offices in another Member State, which has established a branch or provides services in Iceland, intends to transfer its insurance portfolio to another undertaking, holding an operating licence in a Member State, the Financial Supervisory Authority shall publish a notification of the transfer request if the underwriting risk is in Iceland.

An insurance company with head offices in Iceland may accept the insurance portfolio of another undertaking. Such transfer shall be authorised only if the Financial Supervisory Authority confirms that solvency requirements will be satisfied after transfer of the portfolio. If the Financial Supervisory Authority receives notification from a competent authority in another Member State of the transfer of an insurance portfolio to an insurance company with head offices in Iceland it shall provide the competent authority with its opinion within three months of receipt of the request for transfer. The accepting undertaking shall send the Financial Supervisory Authority all information necessary in connection with the transfer in the opinion of the Authority.