The Insurance Regulatory and Development Authority of India (IRDAI) has sought to reassure policyholders of RHICL that all their interests have been adequately protected and all genuine claims will continue to be duly honoured.
In a press release on 6th November, the IRDAI has asked Reliance Health Insurance Company (RHCIL) to stop selling new policies and transfer the entire policyholders’ liabilities to the authority. The insurer can only service its old policies.
Reliance Health Insurance is part of Anil Ambani's Reliance Group, which is facing major liquidity issues. Reliance Health Insurance commenced operations in October 2018 but according to IRDAI, RHCIL has not been able to maintain the required solvency margin since June, 2019.
The IRDAI press release has stated that "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. Thereafter, the insurer was issued a show cause notice and given another opportunity to present its case"
Despite this there was no improvement and further deterioration was observed in the financial position of RHICL. Hence in order to protect the policyholders’ interest, IRDAI has now issued the following directions to Reliance Health Insurance:
1. To stop selling new policies and;
2. To transfer the entire policyholders’ liabilities along with financial assets to Reliance General Insurance Co. Ltd (RGICL) with effect from November 15, 2019. Till that time, RHICL 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 mentioned that RGICL has been mandated to service the claims of the RHICL policyholders promptly and efficiently with effect from 15th November, 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.