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Life insurers might have to cede business up to 30 per cent mandatorily to the sole domestic reinsurer, General Insurance Corp of India (GIC). The insurance regulator will soon bring out the final notification which will specify the percentage of business to be reinsured with GIC, say sources.
In the recent Irda (Life Insurance-Reinsurance) Regulations, 2013, notified in the gazette, the Insurance Regulatory and Development Authority (Irda) mandated life insurance companies to reinsure with domestic reinsurers, a percentage of the sum assured on each policy. It said this percentage would be notified by the regulator and would not exceed 30 per cent of the sum assured.
Currently, general insurers mandatorily cede 5 per cent of their risks to the state-owned reinsurer. Life insurance companies are dependent mostly on foreign reinsurance firms in terms of claim-related issues. However, GIC is now looking at life insurance more seriously.
“The life segment is going to a be a growth providing area. Apart from Indian insurers, we will also go abroad to source business in the life segment,” said A K Roy, chairman and managing director, while announcing the annual results.
Sector officials said while Irda had notified these guidelines, the percentage of risks to be ceded to GIC by life insurers had not been decided. “While presently there is no mandatory ceding of risks to GIC, we expect the regulator to bring out the notifications in the next few months. Therefore, it is expected to be implemented by 2014-15,” said an official involved in this process.
For 2012-13, GIC saw a gross global premium of Rs 15,086 crore registering a growth of 10.8 per cent over the previous year. In 2011-12, GIC collected a gross global premium of Rs 13,618 crore. The Irda guidelines seek to retain maximum reinsurance business within the country. Experts said this would make the Indian reinsurance sector more healthy, since more business would be retained in India.
