Hydearbad:
The insurance regulator IRDAI, for the Indian general insurance industry, has retained the system of 5 per cent obligatory cession with the GIC Re in Fy 2021-22.
“The percentage cession of the sum insured on each general insurance policy to be reinsured with the GIC Re will be 5 per cent in respect of insurance attaching during the financial year beginning from 1st April, 2021 to 31st March, 2022, except the terrorism premium and premium ceded to Nuclear Pool, wherein it would be made ‘NIL’. The entire obligatory cession is to be placed with GIC Re only,'' said IRDAI on Monday.
There would be no limit on sum insured applicable for the cessions made during the scheduled period,
The IRDAI has also asked the domestic general insures to provide GIC Re underwriting information of any cession exceeding an amount as specified.
The ceding insurer has to inform the GIC Re all times whenever the cession exceeds such specified limits, said IRDAI..
Commission:
Percentage of commission on obligatory cession for different classes of business will be as follows:
i) Minimum 5% for Motor TP and Oil & Energy insurance.ii) Minimum 10% for Group Health insurance iii) Minimum 7.50% for Crop Insurance.iv) Average Terms for Aviation insurance.
v) Minimum 15% for all other classes of insurance business.
Commission over and above, can be as mutually agreed between the GIC Re and the ceding insurer, said the IRDA.
Profit Commission:
GIC Re will share the profit commission, on 50%:50% basis, with the ceding insurer based on the performance and surplus of the total obligatory portfolio of the ceding insurer,after factoring the following:
i) Incurred loss % (to be worked at the end of 3 financial years).ii) Management Expenses at 2% iii) Profit at 5%.iv) Commission at 15%.v) Loss ratio at 50% to 78%.
No profit commission is payable if the loss ratio exceeds 78% and profit commission should not exceed 14%