IRDAI Approves Amendments To Reinsurance Regulations
The amendments have been designed to position India as a prominent global reinsurance hub, the IRDAI said.
The Insurance Regulatory and Development Authority of India has approved a series of amendments to the Reinsurance Regulations in a bid to promote a favourable business environment and attract more reinsurers to establish operations in India.
In its 123rd authority meeting, the regulator announced amendments to existing regulations that apply to Indian insurers, Indian reinsurers, foreign reinsurance branches, and International Financial Services Centre insurance offices. The amendments have been designed to position India as a prominent global reinsurance hub, the IRDAI said on Thursday.
Key amendments include:
The minimum capital requirement for foreign reinsurance branches has been lowered from Rs 100 crore to Rs 50 crore, with the provision to repatriate any excess assigned capital.
The order of preference, previously spanning six levels, has been streamlined to four levels.
The format for reinsurance programmes has been simplified, and regulatory reporting requirements have been rationalised for increased clarity and effectiveness.
Alignment with the broader goal of positioning India as a global reinsurance hub by working in tandem with the International Financial Services Centres Authority.
The regulatory framework for IFSC insurance offices has been aligned with International Financial Services Centres Authority regulations, with the intent to remove dual compliance.
The revised order of preference for IIOs, coupled with simplified regulations and improved placement alongside FRBs, fosters a more competitive environment, the regulator said.
"The reduced barriers to entry into the Indian market would be welcomed by multinational businesses and should hasten their investment plans," Prateek Singhal, head-reinsurance at Howden Insurance Brokers India Pvt., told BQ Prime. "The increased supply is going to ensure premium efficiency in favour of the cedants."
"All these developments demonstrate the regulator's intention to create India as the new Asian reinsurance centre," Singhal said.
The focus areas of these amendments revolve around the following:
A concerted effort to increase the overall capacity of the reinsurance sector, which can help accommodate growing demand and manage larger risks.
Enhance technical expertise within the industry, fostering an environment of excellence and innovation.
Reduction of the compliance burden on various entities operating in the sector, allowing them to navigate the regulatory landscape more efficiently.
"As the amendments take effect and the reinsurance market in India evolves, the insurance sector is poised to witness accelerated growth, increased international recognition, and a more robust ecosystem overall," the IRDAI said.
What's Changed
Among the key amendments, the one with the order of preference, previously spanning six levels, streamlined to four levels, will bring about a change of certain fronts.
Singhal said this would have a major impact as they have placed the IIOs, which have a premium in India, in the same category as the FRBs. This will foster the possibility of additional reinsurers and, as a result, increased interest inside India, he said.
Along with the GIC, every cedant must now approach at least four reinsurers from Category 2, which includes IIOs and FRBs. Earlier, Category 2 was limited to FRBs alone. Those IIOs who invest 100% of retained premiums from Indian insurers in the decreasing term assurance are given a priority over those that do not maintain the premiums inside India, he explained.
The earlier order of preference was:
To Indian re-insurers, transacting reinsurance business (other than emanating from obligatory cession) during the immediate past three continuous financial years.
To other Indian re-insurers and FRBs.
To the IIO as under regulation 5(1)(B)(a), which provided the best and lead terms with capacity of not less than 10%.
To the CBR as under regulation 5(1)(B)(b), which provided the best and lead terms with capacity of not less than 10%
To other IIOs.
To other Indian Insurers (only facultative) and CBRs.
Which has now been revised to:
Category 1: Indian reinsurers
Category 2: IIOs (which invest 100 % of retained premiums, emanating from insurers in India, in the DTA) and FRBs.
Category 3: Other IIOs.
Category 4: Other Indian Insurers (only in respect of per-risk facultative placements in the insurance segment for which the insurer is registered to transact business) and cross-border reinsurers.
