Indian insurance regulator IRDAI has retained the prime clause of ‘Order of preference’ that gives power of ‘right to refusal’ to state-owned reinsurer GIC Re with regard to the non-life business.
According to the revised reinsurance guidelines approved by the IRDAI board almost three months back but gazetted on Wednesday, the regulator removed a similar ‘Order of preference’ for the Rs 1,500 crore life reinsurance business, put a cap on how much a cross boarder reinsurer can do business with an Indian non-life insurer in a specific portfolio, laid down detailed guidelines for the reinsurers on how to do their reinsurance business (termed as retrocession) with their board approvals, and re-launched the banned alternative risk transfer business (ART) with the prior approvals of IRDAI.
“The old order of preference is retained and GIC Re is in an advantageous position as before,’’ said Alice Vaidyan, CMD, GIC Re.
The revised norms have defined that any non-life players who want to buy reinsurance cover has to first get quotes from all the Indian reinsurers including GIC Re and four other Indian reinsurers including the foreign reinsurers who are having branch operations in the country.
In all contracts, GIC Re is given the first right of refusal in reinsurance contracts and if it declines to accept the risk, only then it would be given to foreign reinsurer’s branches.
If those quotes are not acceptable to the primary non-life insurer, then it can go to reinsurers who are having operations at International Financial Services Centre (IFSC) at GIFT City in Gujarat.
In the third order of preference, the non-life insurers can approach the cross border reinsurers (CBRs) and lastly the Indian primary reinsurers who are willing to offer reinsurance capacity.
Among the conditions to be eligible for Indian reinsurance business, the CBR should have a credit rating of at least BBB from Standard & Poor or an equivalent rating from an international rating agency during the immediate past three continuous years, the home country of the CBR should have signed Double Taxation Avoidance Agreement with India.
According to the new norms, every Indian insurer, transacting life insurance business, should maintain a minimum retention of 25 per cent of sum at risk under pure protection life insurance business portfolio and 50 per cent of sum at risk under other than pure protection life insurance business portfolio.