In its Financial Stability Report, the central bank has cautioned the growing reliance on cross-border reinsurance suggests that the domestic market’s capacity may not be keeping pace with the specialized or large-scale risk transfer needs of Indian insurers, necessitating greater recourse to global markets
Mumbai:The Reserve Bank of India has made a strong case for strengthening domestic reinsurance capabilities through regulatory incentives or new entrants as it may help retain more premium within the national financial ecosystem, reduce the sector’s vulnerability to external rate hardening, and mitigate the pressure on the balance of payments.
In its Financial Stability Report, the central bank has cautioned the growing reliance on cross-border reinsurance suggests that the domestic market’s capacity may not be keeping pace with the specialized or large-scale risk transfer needs of Indian insurers, necessitating greater recourse to global markets.
It has calculated that the total volume of reinsurance ceded by general and health insurers have expanded significantly from approximately ₹58,900 crore in 2020-21 to around ₹86,300 crore in 2024-25.
“This risk transfer accompanies a notable structural shift in placement of reinsurance. While the absolute amount ceded “Within India” has grown by 1.3 times from roughly ₹44,900 crore to ₹57,000 crore, reinsurance ceded “Outside India” has more than doubled, rising from around ₹14,000 crore in 2020-21 to over ₹29,000
crore in 2024-25,” said the RBI.