Here, GIC Re is given first preference in reinsurance contracts.
The order of preference for reinsurance contracts has been retained in India. In the final regulations on reinsurance, Insurance Regulatory and Development Authority of India (IRDAI) has said that the order will be first General Insurance Corporation of India followed by foreign reinsurance companies operating in India via branches will now be allowed to bid for reinsurance contracts.
IRDAI has said that insurers will be free to obtain best terms for reinsurance protection of domestic risks.
In all contracts, GIC Re is given the first right of refusal in reinsurance contracts. If it declines to accept the risk, only then it would be given to foreign reinsurer's branches.
Reinsurance refers to risk cover taken by insurance companies. They take this cover for protection against financial liabilities of large projects. In case there is a huge claim from an insured loss, the reinsurance cover provides financial assistance to insurance companies.
IRDAI said that reinsurance renewals will have to be done at the beginning of every financial year. No insurer will seek terms from any Indian insurer, not registered with the authority to transact reinsurance business.
IRDAI has said that every Indian insurer has to maintain the maximum possible retention in commensuration with its financial strength, quality of risks and volume of business. In life insurance, IRDAI has said insurers should retail at least 25 percent of sum assured under pure protection and 50 percent for other categories of products.
Seven global reinsurers operate in the Indian reinsurance market through their branches. These include Munich Re, Swiss Re, SCOR SE, Hannover Re, RGA Life Reinsurance Company of Canada, XL Insurance Company SE, Gen Re and AXA France Vie. Specialist insurance market Lloyd's of London has an India branch as well.
Foreign reinsurers had earlier expressed concerns about not getting equal treatment and held discussions with the Finance Ministry on the matter. However, the idea here to is to give more rights to the domestic reinsurers.
The size of the reinsurance market in India is about Rs 45,000 crore and only a negligible portion of it is contributed by branches of foreign reinsurers.The amendment in the insurance laws in 2015 through the Insurance Act (Amendment) Act had said that foreign reinsurers will be allowed to set up branches in India. However, the first preference rule was added later to give a boost to Indian companies first before giving away business to foreign entities.The Great Diwali Discount!
Unlock 75% more savings this festive season. Get Moneycontrol Pro for a year for Rs 289 only.
Coupon code: DIWALI. Offer valid till 10th November, 2019 .