In its revised norms on reinsurance, to be implemented from Jan 1,the Indian  insurance regulator IRDAI has retained  the prime clause of `Order of preference’ that gives power of `right to refusal’ to state owned reinsurer GIC Re with regard to the non- life business.

“The old order of preference is retained and GIC Re is in advantageous position as before,’’ said Alice Vaidyan, CMD,  GIC Re.   

Among other new significant decisions, the revised reinsurance guidelines approved by the IRDAI board almost three months back but gazetted on Wednesday,  however removed a similar `Order of preference’ for the Rs1,500 crore life reinsurance  business, put a cap on how much a cross boarder reinsurer can do business with an Indian non-life insurer in a specific portfolio,lays down detailed guidelines for the reinsurers on how to do their reinsurance business( termed as retrocession)  with their board approvals, re-launched the banned alternative risk transfer business (ART) with the prior apporovals of IRDAI.

The revised norms have defined that any non-life players who want to buy reinsurance cover has to first  get  quotes from all the  Indian reinsurers including  GIC Re and four other Indian reinsurers including the foreign reinsurers who are having branch operations in the country.


In all contracts, GIC Re is given the first right of refusal in reinsurance contracts and if it declines to accept the risk, only then it would be given to foreign reinsurer's branches.

If those quotes are  not acceptable to the primary non-life insure , then  it can go to reinsurers who are having operations at International Financial Services Centre (IFSC) at GIFT City in Gujarat. 


In the third order of preference, the non-life insurers can approach the cross boarder reinsurers(CBRs) and lastly the Indian primary reinsurers  who are willing to offer reinsurance capacity.   

Among the conditions to be eligible for Indian reinsurance business, the CBR should have  a credit rating of at least BBB from Standard & Poor or equivalent rating from an international rating agency during the immediate past three continuous years, the home country of the CBR should have  signed Double Taxation Avoidance Agreement with India.

According to the new norms, every Indian insurer, transacting life insurance business, should maintain a minimum retention of  a.25 per cent of sum at risk under pure protection life insurance business portfolio and  50 per cent of sum at risk under other than pure protection life insurance business portfolio.


The norms also specify that the insurers should ensure its Re-insurance arrangements in respect of catastrophe accumulations are adequate. The insurers will have the catastrophe modeling report and the basis along with return period estimates, on which the quantum of catastrophe protection is purchased for each of the perils for the forthcoming financial year duly approved by its Board.


The top foreign reinsurers, almost numbering 10 now including Munich Re, Swiss Re, Lloyd’s, SCOR ,  Hannover Re, AXA, Allianz, Warren Buffet’s Gen Re, are disappointed with the fact that none of their  major  demands like creating a level playing field, bringing down the capital requirement, which is  now Rs 500-Rs 700 crore, has been considered in the revisec reinsurance norms.


“These regulation do not addewss some of ease of doing business constraintsthat we face and that requires government policy chnages;''said an official of a foreign reinsurer.


Earlier in 2016, the IRDAI had formed a panel under M Ramprasad, a former memember(Non-life), to review the existing reinsurance norms and improve them suitably to meet the requirements of market and new set of players.