The level of participation of private life insurance companies in the bond forward rate agreement (Bond FRA) market slowed down during the financial year 2026-27 (FY27). The main reason for this was the decrease in the share of non-par products in these companies' portfolios. The volume of Bond FRA transactions among private life insurers decreased by almost 16 percent over the year, but this decline is partially offset by the Life Insurance Corporation of India (LIC), which is strengthening its portfolio of non-par products.
Industry experts do not consider this slowdown to be a structural change in demand. One senior investment official at an insurance company noted that the drop in volumes by 15-16 percent is related to a shift in product composition away from non-par products. Nevertheless, he predicts that activity may increase as the assortment continues to change.
Non-par savings products can combine life protection with a savings component, while guaranteed non-par products determine payouts according to policy terms. Guaranteed savings products are more relevant to Bond FRA because insurers use these instruments to manage interest rate risk arising from long-term guaranteed obligations. Pure insurance products, conversely, usually have limited interest rate risk and therefore require less interest rate hedging.
Another investment official at a private insurance company suggested that there might be a trend in the industry towards products such as Unit Linked Insurance Plans (ULIPs) and away from guaranteed products. He emphasized that changes in product composition occur across different companies and can happen quarterly or monthly. However, he does not believe this reflects a structural decline in FRA demand, as current yields remain high—around 7 percent or higher, and in some cases exceed 7.5 percent, making guaranteed products attractive.
This specialist added that as long as insurers can offer attractive guarantees and long-term returns at such high rates, the products should remain in demand. Thus, temporary shifts in product composition leading to reduced demand are possible, but he does not expect a significant decline in FRA demand throughout the year.
In FY26, the share of non-par products decreased among large private life insurers compared to FY25. According to public reports, the share of non-par savings in HDFC Life Insurance, as a percentage of annual equivalent premium (APE), fell from 32 percent in FY25 to 18 percent in FY26. The share of non-par products in SBI Life Insurance's total APE portfolio remained unchanged at 33 percent in FY26. Bajaj Life Insurance also recorded a decrease in its share of non-par products from 21 percent in FY25 to 16 percent in FY26.
Simultaneously, LIC increased the share of non-par products to 35.1 percent of individual APE in FY26 compared to 27.7 percent in FY25, which is part of its overall strategy to strengthen this segment in its product portfolio.