The Insurance Regulatory and Development Authority of India (IRDAI) has directed Reliance Health Insurance to stop selling new products and transfer its liabilities to Reliance General Insurance, with effect from November 15.
The move from the insurance regulator comes after the standalone health insurer recorded a continuous fall in its solvency margin.
IRDAI said Reliance Health Insurance which began operations in October 2018 has not maintained the required solvency margin since June 2019.
Reliance Health is part of Reliance Capital and was set up after carving out a separate entity from the health business of Reliance General Insurance.
While the insurer was asked to restore the level of solvency within one month, IRDAI said that Reliance Health did not comply.
IRDAI mandates that insurers must maintain 150 percent solvency at all times. Reliance Health’s solvency stood at 106 percent till June-end. It slipped to 77 percent by August-end and further deteriorated to 63 percent by September-end.
“The insurer was issued a show cause notice and given another opportunity to present its case. As there has been no improvement but a further deterioration in the financial position of Reliance Health, IRDAI has now issued directions to the insurance company to stop selling new policies and to transfer the entire policyholders’ liabilities along with financial assets to Reliance General Insurance,” the IRDAI order read.
This will come into effect from November 15. Till that time, Reliance Health has been prohibited from using its assets for any payment other than claim settlement. It is estimated that the underlying assets are sufficient to meet the claims of the existing policyholders that may arise in future.
IRDAI said that it will be closely monitoring the situation to ensure a smooth transfer of the portfolio, settlement of claims and protection of the interest of the policyholders.
A Reliance Capital spokesperson said, “As proposed by Reliance Capital, the promoter company of Reliance Health Insurance (RHI) and Reliance General Insurance (RGI), RHI will transfer its health insurance portfolio covering all financial assets and policyholder liabilities to RGI. This process is being undertaken in consultation with the Insurance Regulatory & Development Authority of India (IRDAI) and has been approved by the regulator.”
“There will be no impact on policyholders due to this transition which will begin from November 15, and customers will continue to avail the same benefits as per policy terms and conditions. Further, the process of amalgamation of RHI with RGI is being taken up and will be completed in due course. The decision has been taken in the best interest of policyholders and we are fully committed to servicing our customers,” said the spokesperson.