Transfer of liabilities of around two lakh policies along with assets of Sahara Life is unlikely to have a major impact on SBI Life Insurance as the business of the former is very small, an expert said.
The total number of policies being transferred is only a small percentage of SBI Life's total policies, a company official said.
At the same time, capital related to policies based on actuarial calculation is being transferred to SBI Life, an insurance industry expert said.
Besides, the expert said that the new policyholders may provide an opportunity for SBI Life to offer their product depending on their age profile.
There may not be a big impact on SBI Life, the expert said, adding, it is also a test case for the industry since it was opened for private players in 2000.
On Friday, regulator Irdai directed SBI Life Insurance to takeover the policy liabilities of around two lakh policies along with assets of stressed Sahara India Life Insurance Co Ltd (SILIC).
Not a merger with Sahara Life, just transfer of policyholders: SBI Life
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The decision was taken at the meeting of the Insurance Regulatory and Development Authority of India (Irdai) in view of deteriorating financial health of the SILIC.
Sahara Life Insurance was also not allowed to underwrite new business since 2021. Thereafter, further directions were issued to the insurer to meet the regulatory requirements.
"Despite being provided ample opportunities and sufficient time to ensure compliance, SILIC has failed to comply with directions of the authority and take any affirmative steps to protect the interests of its policyholders," the regulator had said.
Further, the policy data of SILIC reveals that the company's portfolio is showing a run-off trend. The financial position has been deteriorating with rising losses and higher percentage of claims to total premium.
"If the trend is allowed to continue, the situation will worsen and lead to erosion of capital and SILIC may not be able to discharge its liabilities towards policyholders, thereby endangering the interest of its policyholders," Irdai had said.
It said the action against SILIC has been taken after due consideration of all the facts and circumstances.
In its meeting held on June 2, 2023, the authority added that the action was warranted to protect the interest of the policyholders of SILIC.
Irdai said it will continue to monitor the situation and also issue necessary directions as required in the interest of the policyholders of SILIC.
Sahara India Life Insurance was granted a Certificate of Registration in 2004 to transact the business of life insurance.
In view of the certain serious issues on the financial propriety and governance aspects of the insurer, the authority had appointed an administrator to manage the business of the insurer in 2017.