Pension fund merger faces legal hurdles
U.K-based insurers Commercial General Union (CGU) and Norwich Union, which said two weeks ago they planned to merge worldwide will have to clear some legal hurdles before they can combine their pension fund operations in Poland.
The two insurance firms are planning to merge within 18 months. "The (planned) merger will have global consequences because a very large company is coming into being," said Jerzy Wysocki, president of the Polish Chamber of Insurance.
According to Polish pension law, one company (including its dependent entities) is allowed to own or manage only one pension fund. The CGU and Norwich Union merger puts one company in charge of two funds. CGU owns Commercial Union PTE, while Norwich Union Holdings runs Norwich Union PTE. The new company would either have to merge both funds or divest one of them, Wysocki said.
With 2.3 million members, Commercial Union's pension fund is the largest on the Polish market. Norwich Union ranks fifth with 565,000 members. In addition, both companies run life-insurance operations. Commercial Union Polska Ubezpieczenia na Zycie ranks No. 2 with 20% of the life insurance market, while Norwich Union Ubezpieczenia na Zycie only began operations at the end of January.
Robert Sobieraj, an analyst with COK Banku Handlowego, said he thought the merger would go through in Poland, despite potential legal hurdles. "I think that the merger will happen," he said. "Unless there is a clear stand against it from Pension Fund Supervision Office (UNFE)."
But UNFE's position is not clear. Sebastian Bojemski, UNFE's spokesman, said that the way the law will treat mergers is yet to be defined. Bojemski said that 70% of the market is controlled by five pension funds, Commercial Union and Norwich Union among them. The merger will reduce this number to four, he said, and will negatively affect competition.
