IRDAI norms bring global reinsurers on par with Indian players

M SaraswathyMoneycontrol 

In a move that will relax the entry of global reinsurers into India, insurance regulator IRDAI has announced norms that will bring global reinsurance companies on par with domestic players. The new guidelines, which will come into effect immediately, prescribe categories in which reinsurers, both foreign and Indian, applying for licence, will be assessed. Requests for new branch offices will also be scrutinised for their eligibility based on key parameters. In the last week of December, Insurance Regulatory and Development Authority of India (IRDAI) had granted branch licences to Swiss Re, Munich Re, SCOR Re, Hannover Re and RGA Life Reinsurance Company of Canada. All of them fall under Category I wherein the branch office of a foreign reinsurer has to maintain a minimum retention of 50 percent of the Indian reinsurance business. ITI Reinsurance, which is another Indian entity, has been granted the reinsurance licence. But it is not in the same category as its global peers since it is required to report a minimum credit rating and maintain strong financials for a historical period of three years.According to the norms, General Insurance Corporation of India, will have the first right of refusal to new business followed by the five global reinsurance branches. Other Indian or foreign re-insurer(s), whoever is applying for a licence, will then be given preference. Branch offices of foreign reinsurers set up in Special Economic Zone will come next in the order of preference. All other Indian insurers and overseas reinsurers will bring up the rear.Also read: ITI Reinsurance to launch ops by Jan end, plans on a 'lean' lookA senior global reinsurance company executive said that this will help them compete on equal terms with Indian competition. “We are glad that IRDAI paid heed to our demands. If we are investing into setting up a branch here, it is imperative that we get some rights, too,” the official added. 

Reinsurance refers to risk cover taken by insurance companies against large risks that they insure. General insurance companies take majority of the reinsurance in the country and life insurance only constitutes a small chunk of the overall business in the country.

Till now, GIC Re was retaining a portion of the risks and the rest was being passed on to the rest. From now onwards, global reinsurers will have a closer scrutiny of the risks and price it appropriately.