#insurancecontracts

[simrancontractoruk]

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[jyotifestpost]

IRDAI caps value of surety insurance contracts at Rs 500 crore

The Insurance Regulatory and Development Authority of India (IRDAI) has capped the quantum of surety insurance contracts for an insurer at 10 per cent gross premium written subject to a maximum of Rs 500 crore per year.

The IRDAI has also stipulated that the non-life insurers wanting to underwrite the surety insurance risks should have a solvency margin of 1.25.

The Authority on Monday issued the IRDAI (Surety Insurance Contracts) Guidelines 2022 laying down the norms for this line of business.

Non-life insurers are allowed to carry out this business from April 1 onwards.

"The norms will help regulate/develop Surety as a business in India which otherwise is an accepted norm in the western countries," Vikash Khandelwal, CEO, Eqaro Guarantees said.

"However, it would have been ideal if the final norms had also provided for a specialist surety insurance company," Khandelwal added.

The Mumbai-based Eqaro Guarantees is a surety solutions provider.

Presently IRDAI allows standalone health insurance companies.

According to Khandelwal, allowing the surety insurers to work alongside the banks and other financial institutions to share risk-related information and technical expertise will help foster a robust ecosystem and prevent contagion.

"The guidelines are also silent on the right of recourse available to a surety insurance company in the event of a default by the contractor. These are critical and may impede the creation of surety-related expertise and capacities and eventually deter insurers from writing this class of business," he remarked.

There are three parties to this contract viz., Surety-the person who gives the guarantee; the person in respect of whose default the guarantee is given is called the Principal Debtor and Creditor- the person to whom the guarantee is given.

The other underwriting guidelines as per IRDAI are surety insurance contracts can be issued for infrastructure projects of government/private in all modes; the contract bonds may include Bid Bonds, Performance Bonds, Advance Payment Bonds and Retention Money; the insurers can also underwrite Customs or Tax Bonds and Court Bonds; limit of guarantee cannot exceed 30 per cent of the contract value; surety insurance can be issued for specific contracts alone; the insurer cannot issue any surety insurance contracts on behalf of its promoters/subsidiaries, groups, associates and related parties; the insurer shall not enter into alternate risk transfer mechanism; surety insurance contracts cannot cover financial guarantee; and surety insurance cannot be issued where the underlying assets/commitments are outside India.

[personalfn-blog]

Why Life Insurance?

In simple terminology, life insurance is a trust where money is pooled by a group of people to share the misfortune of a selected few.

In modern times, it represents an institution, which pools money from a large group of people in the form of premiums to take care of the not-so-fortunate ones. This money is invested in government securities and bonds and paid to the policyholder either on maturity or his nominees or assignee in case of his untimely demise.

Basically Life Insurance policies are classified in to two classes - the term policy and the pure endowment Policy. All other policies are admixture of these two policies in different proportions.

The term ‘policy’ is an insurance contract wherein the insurer agrees to pay (the legal heirs or assignee of the insured person), a sum assured on his/her death against a periodical payment of insurance premium. However, if the insured person survives till the end of the policy period, nothing is payable to him as per the insurance contract.

Pure Endowment Policy is an insurance contract, which is the exact opposite of the Term Policy. In this, the insurer agrees to pay a sum assured to the insured if he/she survives till the policy period against a periodical payment of insurance premium. However, if the insured person dies during this period, nothing will be payable to his legal heirs or nominee as per the insurance contract.

The various life insurance policies available with the present insurer can be broadly classified as follows-

Term Policies- These are the cheapest policies where there is a life cover but no survival benefit. The claims in case of these policies are less, as normally the insured lives longer than the policy period. As such the premiums are lesser than the other policies.

Whole Life Policies- As the name suggests, this policy is in force till the lifetime of the policyholder. The sum assured is payable to the nominee or heir of the insured on his expiry. As there is always a claim in case of this policy, the premium is more than the other policy.

Endowment Policies- These are the best selling policies for the life insurance. These are combination of Term Policy and Pure Endowment Policy wherein the insured gets a dual benefit. If the policyholder expires during the policy period, his nominees/heir gets the sum assured immediately along with the accrued interest. However if the insured survives till the policy period, he gets the sum assured along with the bonus.

Annuities- These are also called as pension policy. In this case, the policyholder pays the premium periodically or in lumpsum to get a regular pension starting from an age as agreed upon.

Policies like Education Policy, Marriage Policy, etc are all revised fixed term policies where the sum assured is paid to the assignee at the end of the tenure.

Money back policies are endowment policies where some part of the sum assured is paid back to the insured at regular intervals and the remaining amount is paid on the maturity along with the bonus. However if the policyholder expires during the policy period, the entire sum assured is paid to the nominee immediately along with the accrued bonus without deducting the periodic payments.

This post on " Why Life Insurance? "appeared first on personalFN.