Case Study on Change in Control IAIS-ASSAL Training Seminar Lisbon, Portugal, 27-28 April 2006 Makoto Okubo – Member of Secretariat International Association of Insurance Supervisors (IAIS)

Case Study on Change in Control ICP 8: Change in Control The supervisory authority approves or rejects proposals to acquire significant ownership or any other interest in an insurer that results in that person, directly or indirectly, alone or with an associate, exercising control over the insurer. The supervisory authority approves the portfolio transfer or merger of insurance business Case Study on Change in Control April 2006 Makoto Okubo

Case Study on Change in Control ICP 8: Change in Control Essential criteria the term “control” be defined in legislation potential controlling owners apply for approval for the acquisition, or change in control, of the insurers supervisory authority approvals any significant increase in shareholders above the predetermined control levels in an insurer same requirements for the intermediate or ultimate beneficial owners that are outside the jurisdiction where insurer is incorporated Case Study on Change in Control April 2006 Makoto Okubo

Case Study on Change in Control ICP 8: Change in Control Essential criteria must be satisfied to meet licensing criteria, and suitability of persons will apply to prospective owners the structures of financial groups containing potential controlling owners of insurers to be sufficiently transparent to avoid the hindrance of supervision Requirements for financial and non-financial resources Advanced Criteria upon request insurers provide supervisory authority with information on shareholders or any other person directly or indirectly exercising control Case Study on Change in Control April 2006 Makoto Okubo

Case Study on Change in Control Outline of Case Study Proposed acquisition of Merlion Life by Unity Group Country X – country profile; the life insurance industry Merlion Life – company profile; its weaknesses; Merlion Bank’s decision to divest Merlion Life Unity Group – group profile; application to acquire Merlion Life; business plan Key concerns from policyholders protection point of view Regulations of Country X Case Study on Change in Control April 2006 Makoto Okubo

Case Study on Change in Control Group Work Activity 1 Small group discussion on case study. Complete Task 1: Identify any concerns on the proposed acquisition, including its future impact on Merlion Life’s existing policyholders, the ongoing financial condition, any abnormal aspects of the proposed business plan Discuss Task 2: Propose necessary steps to be taken with respect to the concerns identified Case Study on Change in Control April 2006 Makoto Okubo

Case Study on Change in Control Group Work Activity 2 Interview senior management of Unity Group to raise and clarify any concerns Activity 3: Complete Task 2: Propose necessary steps to be taken with respect to the concerns identified Complete Task 3: Discuss whether or not to approve the application and why Activity 4: Each small group to present their recommendation Case Study on Change in Control April 2006 Makoto Okubo

International Association of Insurance Supervisors (IAIS) Questions and Answers makoto.okubo@bis.org or visit www.insurance-finance.com This case study was originally developed by Monetary Authority of Singapore (MAS) and modified by the IAIS to be used in regional seminars. www.iaisweb.org Case Study on Change in Control April 2006 Makoto Okubo