ICICI Prudential to take Over Sahara Life’s Insurance Business

ICICI Prudential Life Insurance Co. Ltd has agreed to take over the life insurance business of Sahara India Life Insurance Co. Ltd, which was effectively wound up by the regulator last month.

“ICICI Prudential Life has agreed to take over the policyholders’ liabilities of Sahara Life and has already commenced valuing the liabilities of the policyholders and earmarking the matching assets of Sahara Life,” said Nilesh Sathe, member, life, at the Insurance Regulatory and Development Authority of India (Irdai).“They will transfer on their books policyholders’ liabilities and corresponding assets. We have given them three weeks to submit the valuation report, which will be reviewed by us for approval,” Sathe added.

ICICI Prudential declined to comment.The administration of Sahara India Life, a subsidiary of Sahara Group, was taken over by Irdai on 12 June. On 23 June, Irdai asked the company to stop issuing new policies, the first time in its 18-year history that the regulator had taken such a step.Subsequently, Irdai offered six insurers—Life Insurance Corporation of India, ICICI Prudential Life, HDFC Standard Life Insurance Co. Ltd, Bajaj Allianz Life Insurance Co. Ltd, Kotak Mahindra Old Mutual Life Insurance Co. Ltd and SBI Life Insurance Co. Ltd a chance to take over Sahara Life's insurance business.

Sathe said the transfer of Sahara Life’s business to ICICI Prudential should be completed in a couple of months. ICICI Prudential is the only company to be publicly listed as of now. As per the annual report of Irdai, its AUM stood at around Rs1.02 trillion compared to Sahara Life’s AUM of Rs1,142.48 crore in FY16.According to Sanjay Agarwal, whole-time director and chief executive officer, Sahara Life, the company will be making a representation to the regulator that policyholders’ interests had never been compromised. The company is hoping that the regulator will review its decision, he said.

Irdai had pointed out three major infractions at Sahara Life. First, the chairman of the board and investment committee, Subrata Roy, had not attended any of the meetings of the board and investment committee during the four years ended March 2015. Roy was jailed in March 2014 (in a dispute between the Sahara Group and another regulator, the Securities and Exchange Board of India) and granted parole on 6 May 2016, and could not have attended meetings during the time he spent in prison; Irdai said it was a serious lapse in governance on the part of the company not to have appointed another chairman. In fact, according to Irdai, it was at its behest that a new chairman O.P. Srivastava was appointed.

Two, the business of the insurer was declining. According to the Handbook of Statistics released by Irdai, Sahara Life’s renewal business constantly declined: the insurer collected Rs140 crore in renewal premium in 2013-14 but by 2015-16 it was able to collect only Rs114 crore.Irdai directed the insurer to furnish a detailed business plan for the three years from 2016-17 to 2018-19 to address its concerns. According to the regulator’s order, the insurer didn’t furnish any plan.

Third, Irdai noticed an increase in the insurer’s expenses. Security and other deposits increased from Rs0.10 crore in 2013-14 to Rs. 71.34 crore in 2014-15. Irdai observed a further increase in 2015-16 to Rs. 78.24 crore. According to Irdai, the company claimed it was expanding its business by opening new offices and had given a security deposit of Rs71.25 crore for opening 646 offices across India. But the regulator said that it had not approved these expansion plans. The insurer paid a rental deposit of less than Rs. 80 crore to a group company that hadn’t been refunded yet, Irdai said.