India has been witnessing an alarming rise in deaths due to Covid-19 due to which insurers have received 22,205 death claims worth Rs 1,644 crore during 2020-21, the Reserve Bank of India (RBI) said in its bi-annual Financial Stability Report (FSR).

The industry settled 21,854 death claims of these amounting to Rs 1,492.02 crore, it said adding that there was no significant impact on the financials of life insurers.

The claims paid ratio (provisional) stood at 98.1 percent for individual claims and 98.6 percent in the group category, compared with 96.8 per cent and 97.3 per cent, respectively, for the previous financial year.

"The pandemic did not have a significant impact on death claim settlement rates," it said.

The report said that insurance premiums collected under various Covid-19-specific policies stood at Rs 1,307 crore for an insured sum of Rs 13.6 lakh crore up to May 15, 2021.

New business premiums about life insurance picked up sharply in March, after plunging in the third quarter of 2020-21, it said.

On the government proposal of having a bad bank to store lenders' dud assets, the RBI's report said the new entity's success will depend on design aspects like fair pricing, complete segregation of risk from selling banks, investment of external capital, independent and professional management of the new entity, minimising moral hazard and adequate capitalisation.

Meanwhile, the FSR said the RBI has selected "MSME (micro, small and medium enterprises) lending" as the theme for the third cohort at its regulatory sandbox after devoting the first two cohorts to retail payments and cross border payments.