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Photo = Yonhap news |
[Alpha Biz= Kim Jisun] Meritz Fire & Marine Insurance has decided to abandon its acquisition of MG Non-Life Insurance after failing to reach an agreement with the labor union, which demanded job security guarantees.
Following five failed attempts at selling MG Non-Life Insurance, financial authorities are now strongly considering liquidating the company. If this happens, 1.24 million policyholders could suffer significant losses.
On Thursday, Meritz Fire & Marine's board of directors decided to relinquish its status as the preferred bidder for the acquisition. The company cited "differences in institutional positions" as the reason, indirectly referring to the strong opposition from MG Non-Life Insurance’s labor union.
Meritz was selected as the preferred bidder in December 2023 but faced fierce resistance from the union due to its plan to acquire MG Non-Life through a purchase and assumption (P&A) method, which does not legally require job succession. As a result, even after three months, the due diligence process for the acquisition had not begun.
As a final offer, Meritz proposed retaining 10% of the workforce and providing a severance compensation fund of 25 billion KRW for non-retained employees. The Korea Deposit Insurance Corporation (KDIC), acting as the financial authority's agent in the sale process, also requested a meeting with the union to discuss employment terms. However, after the union refused to attend the scheduled meeting on March 12, Meritz ultimately decided to withdraw from the acquisition.
With no viable buyers in sight, financial authorities and KDIC are now leaning toward liquidation. Previous attempts to sell MG Non-Life through public auctions failed four times over three years, leading to direct negotiations with Meritz, which have now also collapsed.
Some experts suggest establishing a bridge insurer to temporarily manage policies before a gradual liquidation, but authorities remain skeptical about the feasibility of this approach. A KDIC official stated, "Even if we establish a bridge insurer for temporary operations, substantial capital and manpower would be required to manage claim payments, and legal reviews would also be necessary."
The biggest concern is the financial losses policyholders could face if liquidation proceeds without transferring existing contracts. Under the Depositor Protection Act, policyholders are only guaranteed compensation up to 50 million KRW, with any excess classified as general unsecured claims subject to liquidation proceedings. Additionally, approximately 600 MG Non-Life Insurance employees are at risk of losing their jobs.
Alphabiz Reporter Kim Jisun(stockmk2020@alphabiz.co.kr)
