According to the regulations, insurance companies are mandated to maintain 150% of solvency margins.
The Insurance Regulatory and Development Authority of India (Irdai) has directed Reliance Health Insurance Company (RHICL) to stop selling new policies and transfer the entire policyholders’ liabilities, along with financial assets, to Reliance General Insurance Co (RGICL) with effect from November 15, 2019.
Irdai said Reliance Health Insurance has not been able to maintain the required solvency margin since June 2019.
According to the regulations, insurance companies are mandated to maintain 150% of solvency margins. “RHICL, which commenced operations in October 2018, has not been able to maintain the required solvency margin since June 2019. After it came to the knowledge of Irdai in the later part of August 2019, a direction was issued to RHICL to restore the required level of solvency margin within a period of one month. However, despite repeated follow-ups, this has not been carried out so far,” said Irdai in its press release.
The regulator also said solvency of RHICL was 106% as on June 30, 2019, which further came down to 77% and 63% on August 31, 2019 and September 30, 2019, respectively. “Given the fact that the solvency of the RHICL is considerably below the control level of solvency and based upon submissions made by RHICL and Reliance Capital (RCL), the authority has come to conclusion that continuation of transaction of health insurance business by RHICL at this juncture will not be in the interest of the policyholder,” said Irdai order. Reliance Capital is the sole promoter of RHICL.
“RGICL has been directed to service the claims of the RHICL policyholders promptly and efficiently with effect from November 15, 2019. Irdai will be closely monitoring the situation to ensure smooth transfer of the portfolio, settlement of claims and protection of the interest of the policyholders,”said Irdai. The regulator also said that if RHICL, RGICL and RCL feel aggrieved by the order, an appeal may be preferred to the SAT.