February 1, 2016 12:36:05 am
The Insurance Regulatory and Development Authority (IRDA) has revised its regulations for the reinsurers, giving preference to public sector reinsurer GIC Re in the domestic insurance sector.
“Every Indian insurer has to offer its reinsurance business to Indian reinsurer and then to other reinsurers like foreign reinsures which are having branches in India, Lloyd’s and reinsurers which are having branches in special economic zone of GIFT in Ahmedabad,” IRDA said. In April last year, IRDA had originally released guidelines giving preference to GIC Re, but it revised the norms later following objections raised by foreign players. However, the government representative on the IRDA board spoke against the revised guidelines, forcing the IRDA to revamp the norms again.
The current rules grant parity to all three parties, saying that every Indian insurer, in order of priority, should first offer an opportunity to the Indian reinsurer to participate in its reinsurance business or a foreign reinsurer which maintains a 50 per cent minimum retention or to other Indian insurers. The Insurance Laws (Amendment) Act, 2015, permits foreign reinsurance companies and Lloyds to set up branch office in India.
The IRDA had said “based on the advice received from the Government of India” in a meeting on November 24, it proposed to amend the regulations to require Indian insurers to first offer to the Indian reinsurer —GIC Re is the only Indian reinsurer now with 52 per cent market share — the choice to participate in their facultative and treaty surpluses before other players.
Further, IRDAI regulations clarify that a foreign reinsurer branch cannot cede more than 50 per cent of its total reinsurance placements made outside India with its parent company. Based on necessity, the Indian reinsurer should organise domestic pools for reinsurance surpluses in consultation with all Indian insurers and foreign reinsurer branches.
IRDA will also advise the Indian reinsurer to organise domestic pools for reinsurance surpluses. These regulations will equally be applicable for all reinsurance arrangements of the pool.
Every Indian insurer, reinsurer and foreign reinsurance branch should maintain the maximum possible retention commensurate with its financial strength, quality of risks and volume of business, IRDA’s new draft says.
The reinsurance programme of every Indian insurer, reinsurer and foreign reinsurance branch will be guided by objectives like maximising retention within the country, develop adequate capacity, secure the best possible protection for the reinsurance costs incurred and simplify the administration of business.
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