Transfer of Sahara Life Filesadmin.co unlikely to impact SBI Life’s balance sheet

An expert said that the transfer of liabilities of about two lakh policies along with Sahara Life assets is unlikely to have a significant impact on SBI Life Insurance as the business of the former is very small.

A company official said the total number of policies transferred is only a small percentage of total SBI Life policies.

At the same time, the capital associated with insurance policies is transferred on the basis of actuarial calculation to SBI Life, according to an expert in the insurance industry.

Besides, the expert said that new policyholders may provide an opportunity for SBI Life to offer their products depending on their urban profile.

There may not be a significant impact on SBI Life, the expert said, adding that it is also a test case for the industry since it opened to private players in 2000.

On Friday, regulator Irdai directed SBI Life Insurance to take over the insurance policy liabilities of about two insurance policies as well as the stressed assets of Sahara India Life Insurance Co Ltd (SILIC).

The decision was taken at the Insurance Regulatory and Development Authority of India (Irdai) meeting in view of the deteriorating financial condition of SILIC.

Sahara Life Insurance has also not been allowed to underwrite new business since 2021. Subsequently, further directives were issued to the insurance company to meet regulatory requirements.

“Despite providing ample opportunities and sufficient time to ensure compliance, SILIC has failed to comply with the Authority’s directives and take any positive steps to protect the interests of its policyholders,” the regulator said.

Furthermore, SILIC’s policy statements reveal that the company’s portfolio shows a runoff trend. The financial situation was deteriorating with high losses and a high ratio of claims to total premiums.

“If this trend is allowed to continue, the situation will worsen and lead to capital erosion and the company may not be able to fulfill its obligations to policyholders, thus endangering the interests of its policyholders,” Erdai said.

It said that the action against Celik was taken after examining all the facts and circumstances.

In its meeting held on June 2, 2023, the authority added that this measure was justified to protect the interests of SILIC policyholders.

Erdai said it will continue to monitor the situation and issue necessary directives as required for the benefit of Celec’s policyholders.

Sahara India Life Assurance Company was awarded a Certificate of Registration in the year 2004 for conducting life insurance business.

In light of some serious issues related to the aspects of financial ownership and governance of the insurance company, the Authority appointed an official to manage the business of the insurance company in 2017.