Insurance Regulatory and Development Authority of India (Irdai) on Wednesday ordered Reliance Health Insurance Co. Ltd (RHIC) to stop the sale of new policies as it is unable to meet the solvency margins. Irdai also ordered the company to transfer its assets and policyholders’ liabilities to Reliance General Insurance Co. Ltd (RGIC).
It has asked the RHIC to comply with this order by 15th November. Also ordered RGIC to serve the troubled insurers regarding their claims.
The RHIC was established in October 2018. It went below the solvency margin in June 2019. Since then, the regulator has followed up on the issue with the insurer. Solvency margin is the margin of assets over liabilities, and indicates whether a company is solvent or not and would be able to cover its liabilities. It is mandatory to maintain the margin for all life and non-life insurers, as per Irdai’s Assets, Liabilities and Solvency Margin of Insurers Rule 2000.
“Solvency margin is a key indicator to evaluate an insurance company’s capacity to pay all risks it has covered in the market. Whether it will impact policyholders depends on the quality of business (profitable/not profitable) underwritten and consequent claim ratios,” said Mahavir Chopra, director, health, life and strategic initiatives, Coverfox, an insurance broking firm.
RHIC has admitted that it is not able to meet margin and said they planned to bring new investors. Officials also said that it will be merged with RGIC.