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The Insurance Regulatory and Development Authority (IRDA) has tightened the norms for reinsurers. According to the IRDA (General Insurance – Reinsurance) Regulations 2013, notified in the Gazette recently, tough norms have been put in place for selecting reinsurers outside India.
In the reinsurance business, multiple insurance companies share the risk by purchasing insurance policies from other insurers to limit the total loss the original insurer would face in the case of a disaster.
According to the new IRDA norms, insurers should place their reinsurance business outside India with only those insurers who have a credit rating of at least “BBB” with Standard & Poor’s, or an equivalent rating by any other international agency for the past five years.
The past claims performance of the reinsurers should also be considered while accepting their participation in the reinsurance programme.
The domestic pool for reinsurance surpluses in fire, marine hull and other classes should be organised in consultation with all insurers on “fair” ground for retention of business with India in prescribed ratios, IRDA said.
The reinsurance programmes would commence from the beginning of every financial year. The details would have to be submitted to the regulator at least 45 days in advance.
One of the objectives of reinsurance programme, according to the regulator, is to maximise retention (the portion of risk which an insurer assumes for its own account).
The net retention of non-life insurers increased to 91.84 per cent in 2011-12 from 88.24 per cent in the previous year.
There are many reasons for reforms in the reinsurance business. IRDA found it difficult to track the audit trail of many transactions with regard to reinsurance placements and coinsurance.
Further, there has been a demand from the general insurers that a level playing field be created for foreign insurance companies and Indian reinsurers because, so far, there have been no restrictions in place for the foreign firms. The regulator also plans to introduce a hi-tech electronic platform for transactions and settlement.
naga.gunturi@thehindu.co.in
Source: thehindubusinessline
In the reinsurance business, multiple insurance companies share the risk by purchasing insurance policies from other insurers to limit the total loss the original insurer would face in the case of a disaster.
According to the new IRDA norms, insurers should place their reinsurance business outside India with only those insurers who have a credit rating of at least “BBB” with Standard & Poor’s, or an equivalent rating by any other international agency for the past five years.
The past claims performance of the reinsurers should also be considered while accepting their participation in the reinsurance programme.
The domestic pool for reinsurance surpluses in fire, marine hull and other classes should be organised in consultation with all insurers on “fair” ground for retention of business with India in prescribed ratios, IRDA said.
The reinsurance programmes would commence from the beginning of every financial year. The details would have to be submitted to the regulator at least 45 days in advance.
One of the objectives of reinsurance programme, according to the regulator, is to maximise retention (the portion of risk which an insurer assumes for its own account).
The net retention of non-life insurers increased to 91.84 per cent in 2011-12 from 88.24 per cent in the previous year.
There are many reasons for reforms in the reinsurance business. IRDA found it difficult to track the audit trail of many transactions with regard to reinsurance placements and coinsurance.
Further, there has been a demand from the general insurers that a level playing field be created for foreign insurance companies and Indian reinsurers because, so far, there have been no restrictions in place for the foreign firms. The regulator also plans to introduce a hi-tech electronic platform for transactions and settlement.
naga.gunturi@thehindu.co.in
Source: thehindubusinessline
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