The government has notified move on Tuesday saying that the entire Obligatory Cession is to be placed with General Insurance Corporation of India (GIC Re) only.

Mumbai/New Delhi:

Disappointing the private sector general insurers and foreign reinsurers which are having branches in India, the insurance regulator IRDAI has maintained the status quo on “Obligatory Cession for the financial year 2023-24” at 4%.

Obligatory cession refers to the part of the business that general insurance companies have to mandatorily cede to the national reinsurer GIC Re.

The government has notified move on Tuesday saying that the entire Obligatory Cession is to be placed with General Insurance Corporation of India (GIC Re) only.

The obligatory cession was reduced from 5 per cent to 4 per cent in FY23 and the IRDAI in line with demands of general insurers had indicated that it will be further be reduced and can even be made zero..

The IRDAI, after consultation with the Advisory Committee, and with the previous approval of the Central Government has taken the decision that the percentage cession of the sum insured on each general insurance policy to be reinsured with the Indian Re-insurer (GIC Re), will be 4% (four percent) during the financial year beginning from 1st April, 2023 to 31st March, 2024, except the terrorism premium and premium ceded to Nuclear pool wherein it would be made ‘NIL’, said the notification..

There would be no limit on sum insured applicable for the cessions made during Fy2023-24.

In view of the above, the Indian re-insurer may require the ceding insurer to give immediate notice of underwriting information of any cession exceeding an amount as specified by the former.

The ceding insurer has to inform the Indian re-insurer at all times whenever the cession exceeds such specified limits.


Percentage of commission on obligatory cession for different classes of business will be following:

Minimum 5% for Motor TP and Oil & Energy insurance. Minimum 10% for Group Health insurance, Minimum 7.50% for Crop Insurance. average terms for Aviation insurance, Minimum 15% for all other classes of insurance business.

Commission over and above, can be as mutually agreed between Indian re-insurer(s) and the ceding insurer.

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 incurred loss per centage (to be worked at the end of three financial years). management expenses at 2%. profit at 5%. commission at 15%, loss ratio at 50% to 78%.

No profit commission is payable if the loss ratio exceeds 78%. Profit commission should not exceed 14%.

The size of the Indian general insurance market is over Rs 2.20 trillion in 2022-23. It has been growing at over 15 per cent in recent years except for the last two years when it has faced many challenges due to CovID-19 Pandemic and has grown within 10 per cent single digit.

The approximate size of the Indian reinsurnace market is around Rs 70,000 cror in FY.2022-23.

To begin with, obligatory cession was 10 per cent which was reduced to five per cent afterwards and the foreign reinsurers which are having braches in India are demanding the total removal of the obligatory cession for GIC Re to create a level playing field in the Indian reinsurance market.

There are currently 10 global reinsurers which have set up branch operations in India for the last five years years.