Almost 10 FRBs along with Lloyd’s of London who are now operating in India for last fours years have an average capital of Rs 1000 crore and going by the new regulation after ensuring solvency ratio, the FRBs can return 20 % excess capital to their parent companies
Hyderabad:
The insurance regulator IRDAI with immediate effect has allowed repatriation of excess assigned capital once in a year by foreign reinsurance branches(FRBs)and Lloyd’s with its prior approval in a bid to to attract more reinsurance players into the country for offering reinsurance at a competitive price and the free movement of assigned capital.
It is decided that FRBs and Lloyd’s India are permitted to repatriate excess assigned capital with prior approval of the Authority subject to some conditions,” said the IRDA on Wednesday.
Currently, each of the FRBs along with Lloyd’s are required to have minimum capital Rs 100 crore which has to be increased along with the business growth so that these companies can maintain a required solvency.
Almost 10 FRBs along with Lloyd’s of London who are now operating in India for last fours years have an average capital of Rs 1000 crore and going by the new regulation after ensuring solvency ratio, the FRBs can return excess capital to their parent companies.
Earlier, the IRDA had said it will reduce the capital requirement of FRBs and Lloyd’s to Rs 50 crore from Rs 100 crore for the new FRBs.
The request to repatriate the assigned capital has to be submitted by the foreign reinsurer, who is engaged in reinsurance business through a branch established in India, justifying the reasons for such request, said the IRDAI.
Some of the conditions that have to be complied by the foreign reinsurers are-
-Such withdrawal should not exceed 20% of assigned capital of such FRB/Lloyd’s
India as at the end of last financial year,
-Minimum assigned capital of Rs. 100 crore or such higher sum as specified by the IRDAI at the time of grant of certificate of registration net of provisions as per regulations shall always be ensured,
-Solvency ratio after the repatriation is at least 50 bps higher than the control
level of solvency i.e. 200% as specified by the IRDAI,
-A certificate from certifying Actuary to the effect that sufficient reserves are
made to meet the reinsurance liabilities.
-A certificate from the Foreign Reinsurer stating that the Reinsurer has Net Owned Funds of Rs 5000 crore or such amount as prescribed by the regulations as per the last audited
balance sheet.
The IRDAI has been taking various steps towards the ease of doing business so that insurance penetration can be increased. Various working groups represented by industry officials were constituted to suggest the changes in the existing regulatory
framework and the compliance requirements, said the insurance regulator.
The Committees on Reinsurance Regulations, Ease of Doing Business and Developmental topics and the Committee on Finance and Tax Recommendations for Reinsurance Industry had given their recommendations, on the matters pertaining to repatriation of excess assigned capital by Foreign Reinsurance Branches (FRB) and Lloyd’s India.
The free movement of assigned capital for foreign reinsurance branches is required to ensure sufficient reinsurance capacity in India and to attract more reinsurance players for offering reinsurance at a competitive price, said the IRDAI.
In 2021-22, the foreign reinsurers in India had a total premium of Rs 17,500 crore as against Rs 14,457 crore crore in 2020-21. Their assigned capital increased to Rs 10,377 crore in 2020-21 from Rs 8,667 crore in 2019-20.
Out of all the FRBs, including one of the syndicates of Lloyds in India, four branches reported a profit in 2020-21 while the remaining reported loss.
The total loss reported by all foreign reinsurance branches was Rs 209 crore in FY2020-21 against a loss of Rs 1,115 crore in 2019-20, according to Irdai data.
GIC Re is the national reinsurer, providing reinsurance to direct general and life insurance companies in India.