In an unprecedented move, the insurance regulator IRDAI on Wednesday has directed Anil Ambani's Reliance Health Insurance Company(RHICL) to shut down its operations with immediate effect and transfer the entire policyholders’ liabilities along with financial assets to its sister company Reliance General Insurance Co. (RGICL) with effect from 15th November, 2019.


The IRDAI was compelled to take such a drastic action as the debt laden Reliance Capital, the parent company of RHICL has consistently failed to provide adequate capital to its one year old health insurance subsidiary, that had experienced steady erosion of the required solvency margin of 150 per cent over one year and had plunge to 63 per cent as on Sept 2019.RHICL, which commenced operations in October, 2018 has not been able to maintain the required solvency margin since June, 2019,said the IRDAI.


Till that time, RHICL has been prohibited by the IRDAI 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,said theinsurance regulator in a late evening press release. 


RGICL has been directed by the IRDAI to service the claims of the RHICL policyholders promptly and efficiently with effect from 15th November, 2019. The company RHICL, which was the seventh stand alone health insurance company to join the industry since Oct 2018, had mobilised a premium of Rs 6.14 crore till Sept 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, said the release.


After it came to the knowledge of IRDAI in the later part of August, 2019, a direction by the IRDAI 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. As there has been no improvement but further deterioration in the financial position of RHICL, in order to protect the policyholders’ interest,

In so far as policyholders of RHICL are concerned, the IRDAI would like to assure them that all their interests have been adequately protected and all genuine claims will continue to be duly honored, said IRDAI.


Battered by regulatory action and facing heat from rating agencies, Reliance Group Chairman Anil Ambani earlier had said the group will do more to streamline the group’s overall operations, including exiting the lending business under Reliance Capital and repaying another ₹15,000 crore of the group’s debt by March 2020.


“As part of the transformation process, Reliance Capital will no longer be in the lending business,” he had said.


Between them, the two lending businesses — Reliance Commercial Finance (RCF) and Reliance Home Finance (RHF) — have an asset base of over ₹25,000 crore.


Reliance Capital also had also exited the mutual funds business by selling its stake in Reliance Nippon Asset Management to Nippon Life. Insurance.