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Jan 19, 2018 01:02 PM IST | Source: Moneycontrol.com

Reinsurance regulations to be out by February end: IRDAI chairman

The final reinsurance regulations, which will define how the business is done in the country as well as the order of preference, will be released by end of February, said Insurance Regulatory and Development Authority of India (IRDAI) Chairman TS Vijayan.

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The final reinsurance regulations, which will define how the business is done in the country as well as the order of preference, will be released by end of February, said Insurance Regulatory and Development Authority of India (IRDAI) Chairman TS Vijayan.

Speaking to the press on the sidelines of the FICCI Annual Insurance Summit, Vijayan said the draft regulations have been released, and they will take a decision on it. “We are looking at the stakeholders’ responses. There could be some changes there,” he added.

Last week, in an exposure draft, IRDAI has said the order of preference for placing business with reinsurers will be led by Indian reinsurers who have been transacting business for not less than past three continuous years. Then to other Indian reinsurers will follow. This will be followed by foreign reinsurers' branches, and then by cross border reinsurers (CBRs).

General Insurance Corporation of India (GIC Re) is the only Indian reinsurer with more than three years business track-record in the country. Foreign reinsurers have expressed discontent with the draft norms which are meant to enable utilisation of domestic capacity and domestic reinsurers.

However, the draft said the order of preference will not be applicable for life insurance business or for inter-company arrangements of insurers, transacting direct insurance business in respect of fire, engineering and marine hull insurance business.

In November 2017, the reinsurance expert committee constituted by IRDAI had recommended that the order of preference in reinsurance cessions will be General Insurance Corporation of India (GIC Re) and then [simultaneously to other] Indian Reinsurers, cross border reinsurers (CBRs), foreign reinsurance branches (FRBs), Lloyd’s India and Indian Insurers.

Vijayan's tenure:

IRDAI chairman Vijayan is retiring in the end of February. When quizzed about the regulations that are expected to be brought out before his tenure ends, he explained that they are looking into the life insurance product committee recommendations and bring out suitable regulations.

A committee appointed by IRDAI to look into regulations in life insurance had submitted its report  in December 2017. It made several far-reaching suggestion including that insurers be allowed to offer loans and that life insurers be allowed to distribute products of non-life and standalone health insurers.

Apart from insurance products, the report has suggested that insurers should be allowed to distribute/market non-financial product and services such as hotel bookings, flights, collection of utility bill payments among others.

“When the insurance law, Insurance Law (Amendment) Act was brought out, it had given a number of duties were given to the regulator. We have finished that phase of regulations,” said Vijayan.

The regulator also said there is a need to bring down the expenses of management of companies and look closely at the costs of operations. This, he added, was not just for insurance companies but for companies of other sectors as well.

“If the expenses of management is brought down, premium will go down. But risk premium will remain. But, expenses of management can also be brought down if volumes go up,” he explained.

In terms of new companies entering the market, he said several foreign partners have increased their stake to 49 percent from 26 percent in insurance companies, and that it is a positive sign. “We also have 4-5 companies who have applied for a license and the interest is high especially on the non-life and health front,” added Vijayan.

In 2017, several insurance companies went for an initial public offering (IPO) including SBI Life Insurance, ICICI Lombard General Insurance, HDFC Life Insurance, New India Assurance and General Insurance Corporation of India (GIC Re).

Vijayan is the regulator under which the insurance sector saw its first IPO when ICICI Prudential Life Insurance got listed on the stock exchanges in September 2016.
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