Reinsurance renewal rates likely to see a drop of up to 10% in FY26

The reinsurance renewal rates are likely to drop by up to 10 per cent in financial year 2026 (FY26), due to higher reinsurance capacity and better loss experience of the insurers, sources said.

 

However, the new norms on collaterals for the cross-border reinsurers remain a key concern in this renewal session.

 

Last year, the reinsurance rates saw a marginal increase of around 5 per cent after adjusting for risk, which is expected to see up to 10 per cent drop this year. 

During the April reinsurance renewals, Indian insurance companies transfer a portion of their risk portfolios to reinsurers by paying a certain premium to reduce the likelihood of paying a large obligation in the form of a claim.

 

Globally, these reinsurance contracts between primary insurers (cedants) and reinsurers are renewed in January. During this session, the reinsurers were more comfortable offering coverage on an excess of loss basis.

 

According to insurance broker Aon, the rates were flat to nearly down by 2.5 per cent on a risk-adjusted basis. The demand for reinsurance capacity was also broadly stable.

 

Nymphea Batra, CEO, Guy Carpenter India, said, “Following the market conditions of the past few years, reinsurers entered 2025 with improved earnings and created ample capacity across many lines of business. While it is a late renewal this year, we have observed softer reinsurance rates across most lines. For Indian insurers (cedants), this is translating into more favourable negotiations on the proportional and non-proportional reinsurance arrangements.”

 

Batra added, “Overall, the Indian market and cedants benefited especially for non-loss impacted portfolios. On the catastrophic and risk treaties, the rates have generally seen reductions of approximately. 10 per cent on a risk-adjusted basis.”

 

In India, the state-owned General Insurance Corporation of India (GIC Re) as the domestic reinsurer, Foreign Reinsurance Branches (FRBs), along with cross-border reinsurers, are the key players in the reinsurance segment.  

 

“GIC Re, FRBs, and IIOs getting registered are all keen to further increase their presence and capacities across the reinsurance space in India. The majority of the clients continue to buy the same limits as last year. With the increased capacity available in the market, and the soft market conditions seen, we will witness pricing pressure,” said Prateek Singhal, Executive President & Head – Reinsurance, Howden India.

 

However, the introduction of collateral requirements for cross-border reinsurance (CBR), which came into effect in FY25, was a notable feature of renewal this time. To comply with the new requirements, most cross-border placements opted to hold premium reserves, rather than letters of credit (LOC). Brokers also believe that due to these norms, some of the CBR capacity is not being utilised and with GIC Re and other FRBs scooping up those segments.

 

In February 2024, Irdai issued new norms for CBRs, which require Indian general insurers to collect collateral for reinsurance placements, either through irrevocable Letters of Credit (LoCs) from CBRs or by withholding premiums or funds, to protect the interest of the policyholders and foster confidence in the sector.

 

As per the guidelines for CBR with 'A-' or above rating from Standard and Poor’s or equivalent, the minimum amount of collateral (aggregate of outstanding claims, liabilities, and IBNR reserves) will be 80 per cent, while for below 'A-' rating it will be 100 per cent. The insurer will release such collaterals as specified in the new regulations if all the liabilities of the concerned CBR under reinsurance contract(s) are fully extinguished.

 

Meanwhile, the demand for reinsurance continues to stay healthy as the general insurance industry, with a premium of nearly Rs 3 trillion, taps the reinsurance market. However, the favourable loss experience is also likely to support the rates.

 

“Demand for reinsurance in India remains strong, leading to a moderate increase in required capacity. Most placements are purchasing limits as expiring, although reinsurers are pushing for increased deductibles for catastrophe excess of loss, leading to a slight increase in overall reinsurance capacity. Reinsurance demand is also supported by India’s fast-growing insurance market, driven by government initiatives to close protection gaps, economic growth, and increasing natural catastrophe exposures,” said Shailendra Sapra, CEO of Reinsurance Solutions in India for Aon.