The board of insurance regulator IRDAI will meet on Sep 27 to decide on the new reinsurance regulations and approvals of licenses for a few new players.
The last board meeting of IRDAI held on June 29 couldn’t find time for any other issues except approving the 51 per cent investment of Life Insurance Corporation(LIC) in the debt laden IDBI Bank.
“Everything else including discussion and finalisation of new reinsurance regulations had to be postponed to the next board meeting,’’ said IRDAI sources.
The finalisation of new set of reinsurance regulations, being keenly awaited by the global reinsurers that have presence in India, is overdue as they were expected to be finalised in the month of April but couldn’t be done as the regulatory body was headless between February to Apr end.
“We would be very happy if some basic problems in the existing reinsurance regulations are addressed by the IRDAI soon, as they are highly uneven and favour only GIC Re in terms of right to refusal. What is the point of opening the market and not allowing us a fair play ? We are investing six to seven time more capital than that regulations require us to do. A lot of reinsurance business is also going out of the country to the offshore reinsurers that can be retained in the country.’’ said an official of a global reinsurance company that has operations in India.
The IRDA on 5th May, 2017.had constituted an `Expert Committee on Reinsurance’ headed by former member of IRDAI, M Ramprasad to revamp the existing reinsurance regulations set-up to further streamline reinsurance operations in the country.
However, sources at IRDAI said that though everything will be discussed it is unlikely that the revamped reinsurance regulations would make any changes in the provision allowing GIC Re the first right to refusal.
The committee, that had members including foreign reinsurers and other experts, had unveiled the draft regulation “Insurance Regulatory and Development Authority of India (Reinsurance) Regulations, 2018’ for industry feed-back on Jan 05.
The Draft Regulations seek to do away with different categories (i.e. Category I and Category II) of applicants, currently mentioned under the FRB Regulations and Lloyd’s Regulations. It is proposed that an applicant shall make a requisition for registration application for reinsurance business wherein the branch office of a foreign reinsurer (FRB) shall maintain a minimum retention of 50% of the Indian reinsurance business.
The Draft Regulations propose changes to certain existing definitions in the General Reinsurance Regulations and Life Reinsurance Regulations. It also proposes to introduce new definitions of the terms like alternative risk transfer (ART),Reinsurance Slip, Retrocedant,inclusion of “crop” as a separate Insurance Segment, Board,Exempted Insurer, International Financial Service Centre
Insurance Office (IIO).
The revamped regulations also aim to ensure that maximum reinsurance business is retained within the country and preference would be given to Indian domiciled entities — with the first right of refusal lying with the GIC Re and then cascading down to foreign reinsurers (FRBs) and other ‘Indian reinsurers’. The spillover should be placed with cross border reinsurers (CBRs), fulfilling certain laid-down criteria.
However the foreign reinsurers both inside and outside India were against GIC Re continuing to be provided with special power of `first right to refusal’