The IRDAI (Indian Insurance Regulatory and Development Authority) has directed Reliance Health Insurance to stop selling new products and to transfer its liabilities to Reliance General Insurance with effect from 15 November.
The move from the insurance regulator follows a continuous decline in the wealth margin of the independent health insurer.
IRDAI said that Reliance Health Insurance, which started operations in October 2018, has not maintained the required wealth margin since June 2019.
While the insurer was asked to restore solvency levels within a month, IRDAI said that Reliance Health had failed to do so.
The IRDAI mandates that insurers must maintain a solvency of 150 per cent at all times. Reliance Health’s solvency was 106 per cent by the end of June. It slipped to 77% by the end of August and deteriorated to 63% by the end of September.
“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 decline 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 ensuring a smooth transition of the portfolio, resolution of claims and security of policyholders ‘ interests will be closely monitored.
A Reliance Capital spokesperson said, “As proposed by Reliance Capital, the Promoter of Reliance Health Insurance (RHI) and Reliance General Insurance (RGI), RHI will transfer its health insurance portfolio covering all financial assets and policyholders ‘ liabilities to RGI. This process is being undertaken in consultation with the Indian Insurance Regulatory & Development Authority (IRDAI).
“As a result of this transition, which will begin on 15 November, there will be no impact on policy holders and customers will continue to benefit from the same benefits as the policy terms and conditions. Furthermore, the process of amalgamation of RHI with RGI is underway and will be completed in due course. The decision was taken in the best interest of the policyholders and we are fully committed to serving our customers, “said the spokesperson.