Acquisition of a significant stake in an insurer: key considerations for investors

Investments in the insurance business in Ukraine require not only proper structuring of a transaction but also timely completion of regulatory procedures. One of the key requirements is the approval of the National Bank of Ukraine (the “NBU”) regarding the acquisition or increase of a significant stake in an insurer.

AVELLUM highlights the current rules governing such approval under Law of Ukraine “On Insurance” No. 1909-IX dated 18 November 2021 and Regulation on Authorisation of Financial Services Providers and the Conditions for Conducting Financial Services Activities, approved by NBU Resolution No. 199 dated 29 December 2023.

When NBU approval is required

A person must obtain the NBU’s approval for the acquisition or increase of a significant stake in an insurer if, as a result of the relevant transaction, it:

• directly or indirectly, individually or jointly with other persons, will hold 10%, 25%, 50% or more of the share capital of the insurer or the voting rights attached to shares or interests in the share capital of the insurer; and/or
• regardless of formal ownership, will exercise significant influence over the management or activities of the insurer.

It is important to note that the threshold levels of a significant stake for insurers differ from those applied to banks. Therefore, investors with prior experience in financial sector transactions should separately verify the requirements applicable specifically to insurers.

Each subsequent acquisition or increase of a significant stake up to the relevant threshold levels also requires NBU approval. A separate obligation is established for persons who already hold a significant stake in an insurer. If such a person intends to transfer its significant stake to another person or to reduce it below the relevant threshold levels, it must notify the NBU of such intention in writing within 3 business days from the date of adoption of the relevant decision.

Timelines: why approval should be planned in advance

The matter of approval of a significant stake may materially affect the overall timeline of a transaction.

A person must obtain the NBU’s approval for the acquisition or increase of a significant stake in an insurer no later than one month prior to the anticipated date of such acquisition or increase.

At the same time, the NBU reviews the package of documents submitted for the approval of the acquisition or increase of a significant stake in an insurer within 5 months from the date of receipt of the application and documents.

In practice, this means that NBU approval should be factored in at the stage of planning the transaction structure, agreeing its timeline, signing and closing conditions, and the relevant provisions in the transaction documents.

In particular, the parties should determine in advance who is responsible for the preparation and submission of documents to the NBU, how NBU approval will be reflected in the conditions precedent, what the long-stop date for their satisfaction will be (having regard to the timelines set out above), and what the consequences of a delay or refusal of approval will be.

Documents to be submitted

A person intending to acquire or increase a significant stake in an insurer must submit to the NBU a package of documents which includes, in particular:

• an application for the intention to acquire or increase a significant stake;
• documents for the identification of the applicant;
• merger clearance from the Antimonopoly Committee of Ukraine (the “AMCU”) or a preliminary conclusion that such clearance is not required;
• documents for the assessment of the financial standing of the applicant, including an auditor’s report for individuals and legal entities, as well as financial statements and an audit report for legal entities; and
• documents confirming that the applicant’s business reputation meets the established requirements.

Particular attention should be paid to the antitrust aspect. Even if a transaction does not require a merger clearance from the AMCU, obtaining a preliminary conclusion confirming the absence of such requirement may take additional time and affect the transaction completion timeline.

For this reason, the matters of NBU approval and potential engagement with the AMCU should be analysed in parallel and at an early stage of transaction preparation.

Document review fee

As at the date of this publication, the fee for reviewing a package of documents for the approval of the acquisition or increase of a significant stake in an insurer amounts to UAH57,700.

Updating the ownership structure of an insurer

Following changes in the ownership structure of an insurer, the insurer must submit updated ownership structure documents to the NBU within 15 business days from the date of the relevant changes. This applies, in particular, to changes in the composition of the holders of a significant stake or the size of their shareholding.

The following documents must be submitted to the NBU:

• a notice of changes in the ownership structure in the prescribed form;
• an updated ownership structure; and
• information on the holders of a significant stake and key shareholders in the prescribed form.

The forms and requirements for such documents are established by Regulation on Requirements for the Ownership Structure in the Financial and Payment Services Market, approved by NBU Resolution No. 30 dated 14 April 2021.

Practical implications for investors

The approval of the acquisition or increase of a significant stake in an insurer is an important element of the transaction process. It requires the preparation of a significant volume of information about the applicant, confirmation of its financial standing, verification of business reputation, and consideration of antitrust procedures.

Given the NBU’s document review timelines, this matter should not be left until the final stages of a transaction. Timely preparation allows for minimising the risk of a closing delay, properly reflecting the regulatory conditions in the transaction documents, and ensuring a more predictable process for all parties.

AVELLUM provides comprehensive legal support in the process of acquiring a significant stake in an insurer, including transaction structuring, analysis of regulatory requirements, preparation and submission of documents to the NBU, engagement with regulators, and support throughout the process until the relevant approval is obtained.

For further information, please contact AVELLUM’s managing partner Mykola Stetsenko, partner Andriy Romanchuk and counsel Oleksandr Volodin.