Insolvency proceeding against Aviva Life Insurance Company – Should current policy holders worry ?
The admission of an insolvency & bankruptcy proceeding against Aviva Life Ins Co on the complaint of an operational creditor has given a rippling effect in the financial / insurance sector. Post #ILFS , #DHFL & #PMC issue, such news was a shock to many. Very recently IRDAI had asked Reliance Medical Insurance Co to wind up its operation & this another set back was something which insurance sector was not ready for.
This news led to sharing of all sort of negative inputs on social media. People even started raising question on the capability of the private sector financial companies to keep people’s hard-earned money safe. It is reported that Aviva Life started getting phone call from its customers seeking refund of their policy money etc.
However , this issue is bit different. It is not that Aviva Life is facing any liquidity / finance crisis. This petition was from an operational creditor i.e. owner of the premises where AVIVA was having its office. It is a disputed matter where Aviva has not accepte this liability of Rs 27 lakhs claimed by the premise owner. By a common understanding , an on-going concern can be put in bankrupt category only when it express its inability to pay the legitimate liability of creditors or customers on account of liquidity kind of crisis. Here the liability matter is in dispute & hence the court should have first explored the genuinace of the liability / claim before admitting the case.
The second aspect is about the power of NCLT to admit an insolvency case under the provision of IBC for a finance company , insurance being a part of the domain. From very beginning, Aviva Life took a plea that the petition was not admissible itself. Even the legal experts are also divided on this issue & many have the opinion that Aviva stand was correct. Anyway , Aviva is taking this matter to the tribunal level.
But all must be very clear that this case has nothing to do with the financial stability / solvency of the company at all. As per IRDAI solvency requirement , an insurance company in India is required to have an Asset of Rs 150 against the liability of Rs 100 i.e. 150% solvency ratio. As per the IRDAI report itself Aviva Life has a solvency ratio of over 300% that means for a Rs 100 liability they have Rs 300+.
The current policy holders need not worry about the safety of their fund at all.
