IRDAI bars Reliance Health Insurance from selling new policies due to low solvency margin

In a setback to the newly set up Reliance Health Insurance Company, the insurance regulator has barred it from selling new policies and has asked it to transfer the entire policyholders’ liabilities along with financial assets to Reliance General Insurance by November 15.

The order by the Insurance Regulatory and Development Authority of India comes after it was found that Reliance Health Insurance Company (RHICL) has not been able to maintain the required solvency margin since June this year.

“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-up, this has not been carried out so far,” the IRDAI noted, adding that the insurer was issued a show-cause notice and given another opportunity to present its case.

BusinessLine has sought a response from RHICL on the order.

“As there has been no improvement but a further deterioration in the financial position of RHICL, in order to protect the policyholders’ interest, IRDAI has now issued directions,” the regulator said.

Till that time, RHICL has been prohibited from using its assets for any payment other than claim settlement, it further said.

“It is estimated that the underlying assets are sufficient to meet the claims of the existing policyholders that may arise in future,” IRDAI said.

According to the nine-page IRDAI order, RHICL had reported a solvency ratio of 106 per cent as on June 30, 2019, which is below the mandated level of 150 per cent. Through a letter on September 10, RHICL then reported a solvency ratio of 77 per cent as on August 31, 2019, and said it plans to bring in fresh investors or additional promoters. The solvency ratio further declined to 63 per cent by September 30, 2019.

Further, as per the report of RHICL, the difference between its assets and liabilities as on September 30, 2019 was ₹31.66 crore as against the statutory requirement of ₹50 crore, the IRDAI order noted.

The health insurer has also been directed to service the claims of the RHICL policyholders promptly and efficiently from November 15, and IRDAI has said 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.

The regulator has also assured policyholders that all their interests have been adequately protected and all genuine claims will continue to be duly honoured.

Reliance Health Insurance, a wholly-owned subsidiary of the Anil Ambani led Reliance Capital, had received final approval from IRDAI in August last year and had commenced operations by the December quarter of 2018.

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