Following examination of credit insurance covers being marketed by general insurers to banks offering credit facilities to debtors, it is observed that such covers appear to be in the nature of credit default insurance. Therefore such covers necessarily need to have a different regulatory treatment. The Authority under the powers vested in Section 14(2) of the IRDA Act, 1999 shall therefore frame suitable guidelines in this regard. In order to do so the Chairman, IRDA under the provisions of Section 110C of the Insurance Act, 1938 seeks details of the total exposure of the company under the credit insurance policies issued by them to banks offering credit facilities to debtors in the enclosed format. The said information shall be submitted to the Authority within 10 days of the receipt of this letter.
The Authority, after examining the credit default insurance contracts has come to the conclusion that the insurers are underwriting risks which do not have proper regulatory framework or sanction. Hence, in exercise of powers under Section 14(1) and 14(2)(i) of the IRDA Act, 1999, the Authority hereby order that all general insurers to stop selling these policies till such time the Authority comes with detailed guidelines in this regard.
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