Regulator IRDAI has asked the re/insurers to take its prior approvals for any re-insurance arrangement which do not have pure risk transfer such as Capital Gearing Treaty, Alternate Risk Transfer(ART) Solution, Financial Re-insurance, non-traditional structured re-insurance solution or any other term.
“In case, the re/insurer intends to adopt ART, non-traditional structured solutions, Financial Re-insurance, then it shall take prior approval of the IRDAI,'' said IRDAI.The insurers have to inform the IRDAI on or before 1st March of every year about any such proposed re-insurance arrangement to be entered in to by the insurer.
The insurers have to obtain due confirmation from the lead reinsurer(s) specifying the methodology used for such risk transfer and its compliance and submit the same with the IRDAI whenever called for, added IRDAI.
The existing norms requires the re/insurers to submit their re-insurance programme for the forthcoming financial year, forty-five (45) days before commencement of the financial year.
According to sources, currently, there are no ART deals in the Indian market except GIC Re's ART deal with Swiss Re in natural catastrophe segment.
The alternative risk transfer (ART) market is a portion of the insurance market that allows companies to purchase coverage and transfer risk without having to use traditional commercial insurance. The alternative risk transfer market includes risk retention groups (RRGs) as well as insurance pools and captive insurers.