Participation by private life insurers in the Bond Forward Rate Agreement (Bond FRA) market has been muted so far in financial year 2026-27 (FY27), primarily due to a decline in the share of non-participating (non-par) products in their portfolios. According to reports from Business Standard, Bond FRA volumes among private life insurers have fallen nearly 16 per cent during the year, while the Life Insurance Corporation of India (LIC), which is strengthening its non-par portfolio, has partly offset the decline. However, industry experts do not view the moderation as a structural reversal in demand.
Non-par savings products can combine life insurance protection with a savings component, while guaranteed non-par products specify the benefits payable under the policy terms. As reported by Business Standard, guaranteed savings products are more relevant to Bond FRAs, which insurers use to manage interest-rate risk arising from their long-term guaranteed liabilities. Pure protection products, on the other hand, generally have limited interest-rate risk and require less interest-rate hedging.
Industry experts do not view the moderation as a structural reversal in demand. According to reports from Business Standard, a senior investment official at a life insurer stated that "amid the change in product mix away from non-par products, the volumes of private life insurers have dropped nearly 15-16 per cent in the market. However, as the product mix changes again, the activity is also likely to pick up." Another investment official noted that "there could be some movement in the broader industry towards products such as Unit Linked Insurance Plans (Ulips) and away from guaranteed products. Product mix changes from company to company and can happen on a quarter-on-quarter (Q-o-Q) or month-on-month (M-o-M) basis. However, I don't think this represents a structural decline in FRA demand."
The share of non-par products came down across major private life insurers in FY26 compared with FY25. As reported by Business Standard, HDFC Life Insurance's share of non-par savings as a proportion of individual annualised premium equivalent (APE) dropped to 18 per cent in FY26 from 32 per cent in FY25. SBI Life Insurance's non-par share in the total APE mix remained unchanged at 33 per cent in FY26, while Bajaj Life Insurance also saw a drop in its share of non-par to 16 per cent from 21 per cent in FY25. At the same time, LIC increased the proportion of non-par products as a share of individual APE to 35.1 per cent in FY26 from 27.7 per cent in FY25 as part of its broader strategy to strengthen the segment in its product mix.
