New reinsurance rules for life insurers

The Insurance Regulatory and Development Authority (Irda) has told life insurance companies to reinsure with domestic reinsurers a percentage of the sum assured on each policy.

The Irda (Life Insurance-Reinsurance) Regulations, 2013, said this percentage would be notified by the regulator and not exceed 30 per cent of the sum assured.

Indian life insurers have reinsurance contracts with the sole reinsurer, General Insurance Corporation of India (GIC Re). However, there was no instruction to reinsure a percentage of the sum assured with it. Further, Irda has asked the life insurers in their reinsurance programme to have the maximum retention within the country. GIC Re has welcomed this.

The gazette notification says the retention limit ranges from Rs 5 lakh to Rs 30 lakh, based on the age of the insurer and the type of product.

For instance, a pure protection one such as a term, insurance or personal accident product would have a retention limit of Rs 5 lakh for a zero to three-year-old insurer. The same products for a 12-15 year-old insurer would attract a Rs 20 lakh retention limit.

Irda has also told insurers to have reinsurance arrangements with only those foreign companies, with a minimum credit rating of BBB (with Standard and Poor's) over the past five years. It has said if the reinsurance premium to total premium ratio exceeds two per cent for savings and 30 per cent for term and health insurance, the detailed workout for each product is required to be reported to it.