Irdai advises firms about minimum rate rule for reinsurance treaties

Regulator's instruction is about burning or break-even cost calculated to estimate the expected losses for a policy

The industry regulator has asked non-life insurers and reinsurers to ensure that the burning costs rate published by the Insurance Information Bureau (IIB) for fire and engineering risks are not applied in reinsurance treaties in the Indian market starting from April 1 next year.

Burning or break-even cost for reinsurers is calculated by estimating the expected losses for a policy based on the average for past years, after allowing for claims inflation, exposure changes and any other amendments needed to make past claims data relevant to today's situation.

The Insurance Regulatory Development Authority of India (Irdai) gave the instruction after