 "Foreign reinsurers oppose proposal to give preference to Indian reinsurers")
Foreign reinsurers have written to the government seeking relaxation on the proposal to give Indian reinsurers first preference in premium ceding. They have also submitted their views to the Insurance Regulatory and Development Authority of India (Irdai) and this is likely to be discussed at its next board meeting.
Irdai, in an exposure draft, proposed that first preference should be given to Indian reinsurers in their treaty surpluses. The regulator has added a provision to the registration of branch offices of foreign reinsurers where it has said first preference for cessions will be given to Indian entities.
After the guidelines for opening of branch licences was brought out, several of companies like Swiss Re, Munich Re, Hannover Re, SCOR and RGA (Reinsurance Group of America) had applied for branch licences.
"We have already written to the government and sought some clarity on this proposal. If this is finalised, doing business in India would not be viable," said a senior official of a global re-insurance company.
The reinsurance industry is worth about Rs 18,000 crore in India, of which life insurance constitutes about Rs 1,200 crore. In its Registration and Operations of Branch offices of Foreign Reinsurers other than Lloyd’s Regulations 2015, Irdai had said an insurer could offer cessions for participation to any Indian or international reinsurer with a branch presence.
Reinsurance sector officials said even though it is a draft, since the regulator has said in the guidelines that these changes were made on the advice of the government, this proposal is unlikely to be revised.
General Insurance Corporation of India (GIC Re) is the sole domestic reinsurer and belongs to the public sector. According to the norms, there is a mandatory cession to GIC Re, which means a fixed percentage of total risks has to be reinsured with the national reinsurer.
The percentage for financial year 2016 has been fixed at five per cent, though it varies from one year to the other. Further, Irdai had also mandated life insurance companies to reinsure a percentage of the sum assured on each policy with domestic reinsurers.
Irdai had said this percentage could be between zero and 30 per cent and would be notified later by the regulator. However, this is yet to be implemented.
Irdai, in an exposure draft, proposed that first preference should be given to Indian reinsurers in their treaty surpluses. The regulator has added a provision to the registration of branch offices of foreign reinsurers where it has said first preference for cessions will be given to Indian entities.
After the guidelines for opening of branch licences was brought out, several of companies like Swiss Re, Munich Re, Hannover Re, SCOR and RGA (Reinsurance Group of America) had applied for branch licences.
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"We have already written to the government and sought some clarity on this proposal. If this is finalised, doing business in India would not be viable," said a senior official of a global re-insurance company.
The reinsurance industry is worth about Rs 18,000 crore in India, of which life insurance constitutes about Rs 1,200 crore. In its Registration and Operations of Branch offices of Foreign Reinsurers other than Lloyd’s Regulations 2015, Irdai had said an insurer could offer cessions for participation to any Indian or international reinsurer with a branch presence.
Reinsurance sector officials said even though it is a draft, since the regulator has said in the guidelines that these changes were made on the advice of the government, this proposal is unlikely to be revised.
General Insurance Corporation of India (GIC Re) is the sole domestic reinsurer and belongs to the public sector. According to the norms, there is a mandatory cession to GIC Re, which means a fixed percentage of total risks has to be reinsured with the national reinsurer.
The percentage for financial year 2016 has been fixed at five per cent, though it varies from one year to the other. Further, Irdai had also mandated life insurance companies to reinsure a percentage of the sum assured on each policy with domestic reinsurers.
Irdai had said this percentage could be between zero and 30 per cent and would be notified later by the regulator. However, this is yet to be implemented.
