The insurance regulator has released a set of amendments to reinsurance regulations. In the draft, the Insurance Regulatory and Development Authority of India (Irdai) has sought to revise the order of preference while placing reinsurance business, among other things. The proposed change could prove to be undesirable for state-owned General Insurance Corporation (GIC Re), reported Business Standard.
“The objective of these regulations is to harmonise the provisions of various regulations applicable to insurers and reinsurers, including foreign reinsurance branches (FRBs), and Lloyd’s to enhance ease of doing business by amending the regulations,” Irdai said in a circular.
Indian insurers as of now are required to seek best terms for their facultative and treaty surpluses from Indian reinsurers holding minimum prescribed credit ratings for the past three years, now on General Insurance Corporation (GIC Re), and three category I branches of foreign reinsurers.
Following that, the insurer has to offer best terms for participation to the various reinsurance providers in the following order: GIC Re and then category I branches; other Indian reinsurance companies or category II branches; foreign reinsurers’ branches in special economic zones; and other Indian insurers and cross-border reinsurers.
The regulator is proposing that in the order of preference first there will be the category I Indian reinsurers, including GIC Re, foreign reinsurance branches (FRBs), Lloyd’s India, and International Financial Service Centre Insurance Offices (IIOs).
In the second category, there will be cross-border reinsurers, who agree to retain a minimum 50 per cent premium by way of premium deposit with the cedant.
The insurers will also have to agree to provide collaterals/ letter of credit/ bank guarantee for 50 per cent premium to the cedant and to maintain a dollar-denominated account in IFSC Banking Unit in IFSC and maintain 50 per cent of premiums in the account.
In the order of preference, category 3 will be for other Indian reinsurers (facultative) and other cross border reinsurers.