Setting the stage for the entry of global reinsurers, the Insurance Regulatory Development Authority of India (IRDA) has set a capital requirement of Rs 100 crore for allowing new reinsurers to set up
operations in the country. Currently, public sector GIC is the only reinsurance company directly operating in the country.
Issuing the final norms on Friday, the IRDA has made provision for two categories of reinsurers who will be allowed to open office in the country. Under Category I (those with the order of preference of cessions at par with the Indian reinsurer like GIC Re), a branch office has to maintain a minimum retention of 50 per cent of the Indian reinsurance business.
Under Category II, reinsurers will have to maintain a minimum retention of 30 per cent of the Indian reinsurance business. The new reinsurers will have to commence its business within 12 months of the date of registration, IRDA guidelines say. The regulator will take a decision on the number of reinsurers that may be permitted to set up branches in a year “keeping in view the orderly growth of the insurance and reinsurance market, national interest, and any other related aspects”.
The regulator has made it clear that any repatriation of the surplus generated by the operations of the branch offices of foreign reinsurers will be only with prior approval of the IRDA. Before granting such an approval, IRDA will obtain all relevant information and satisfy itself that the assets of the branch offices are adequate to meet their liabilities. In addition, the repatriation of surplus will comply with the other requirement of RBI and FEMA, IRDA says.
Further, the global reinsurer has to make a firm commitment to appoint in its branch office in India, sufficiently skilled staff to underwrite specialised classes of business and that the underwriting of Indian business will take place at the Indian branch. The applicant will make a commitment to organise training of Indian underwriters in handling various classes of business. Any foreign reinsurer who has a representative office in India and is granted certificate of registration to function as a branch office, has to close the representative office within six months of grant of new license.
IRDA would consider
requests for requisition for registration application from applicants if they obtain the prior approval or an in-principle clearance from the home country regulator at the time of filing the application. The net owned fund of the applicant should not be less than the prescribed amount of Rs 5,000 crore at any time.