The acquisition of MG Insurance by Meritz Fire & Marine Insurance is at risk of collapsing due to opposition from the MG Insurance union. The union is rejecting a due diligence process for the sale, demanding the withdrawal of the acquisition under an asset transfer (P&A) method, which has no obligation for employment succession. Meanwhile, the Korea Deposit Insurance Corporation, which received the mandate for a public sale from financial authorities, stated that if this sale falls through, it will have no choice but to consider the liquidation and bankruptcy of MG Insurance. Kim Byung-hwan, chair of the Financial Services Commission, noted, "MG Insurance does not have many options left."
If MG Insurance goes into liquidation or bankruptcy, the 1.24 million MG Insurance subscribers (with 1.56 million contracts) will inevitably suffer. The Korea Deposit Insurance Corporation also remarked on the 16th, "In the unlikely event that MG Insurance is settled through liquidation or bankruptcy, there is a possibility of direct damage to policyholders."
If liquidation or bankruptcy is decided, 1.24 million will receive compensation up to 50 million won under the Deposits Protection Act, and the insurance contracts they have maintained will be forcibly terminated. Ultimately, 1.24 million people will have no choice but to join products from other insurance companies. However, if they have a history of illness, have developed chronic conditions, or have records of receiving examinations or treatments for health reasons during that time, they may end up paying high premiums or, in the worst-case scenario, face rejection of their insurance applications. With MG Insurance closing its doors, customers who cannot sign up for insurance, losing their risk coverage, are emerging.
Another issue is that the compensation is based on the surrender value. In the case of coverage insurance like health insurance, a large amount of insurance money is paid out when a disease occurs, but the surrender value returned when the contract is terminated is often less than the insurance premiums paid so far. Even though one can receive up to 50 million won, the actual compensation is expected to be less than this.
On the other hand, long-term savings insurance has a high surrender value, but the compensation is capped at 50 million won, which poses a significant loss risk. Moreover, products like variable insurance that invest premiums into funds or securities to generate revenue are excluded from the Deposits Protection Act. However, even variable insurance products where the insurance company guarantees a certain interest rate are subject to the Deposits Protection Act.
Some suggest that, like the past Regent Fire incident, even if MG Insurance goes into liquidation or bankruptcy, if the contracts of MG Insurance are transferred to another insurance company, it could minimize damage. However, the Korea Deposit Insurance Corporation's stance is that this confuses contract transfer with liquidation or bankruptcy and that such assertions are not factual.
According to the Korea Deposit Insurance Corporation, Regent Fire, designated as a troubled financial institution in 2001, transferred contracts to five insurance companies, including Samsung Fire & Marine Insurance and Hyundai Marine & Fire Insurance, the following year after a failed sale, and went bankrupt in 2003 under a court ruling. This is similar to what is being done with Regent Fire, which was split into five and sold (transferred) to each insurance company, making the situation different from MG Insurance, which is being discussed for liquidation and bankruptcy. The Korea Deposit Insurance Corporation explains that selling MG Insurance to Meritz Fire & Marine Insurance is equivalent to transferring all contracts to Meritz Fire & Marine.
If the Korea Deposit Insurance Corporation pursues a method of transferring contracts to multiple insurance companies, as it did with Regent Fire, it will need to look for insurance companies willing to jointly acquire MG Insurance. However, it is highly likely that no other insurance companies besides Meritz Fire & Marine Insurance will be willing to take on MG Insurance contracts. This is why there are warnings that if the sale fails, contracts will end and liquidation or bankruptcy proceedings must be initiated.
An insurance industry representative stated, "Contract transfer maintains an insurance contract, while liquidation and bankruptcy terminate the contract," adding, "Confusing these two claims that even if MG Insurance goes into liquidation or bankruptcy, transferring the contracts would not be a problem is factually incorrect."
Meanwhile, it has been confirmed that the union recently conveyed their opinion to the Korea Deposit Insurance Corporation to review whether there are legal issues related to the sale's due diligence, such as the infringement of trade secrets. The Korea Deposit Insurance Corporation expects the union to respond to the due diligence if the results of the legal review show that there are no issues.