This comprehensive regulatory overhaul is strategically designed to position India as a prominent global reinsurance hub. The revised Order of Preference for International Financial Services Centre Insurance Offices (IIOs), coupled with simplified regulations and improved placement alongside Foreign Reinsurance Branches(FRBs), fosters a more competitive environment, said the IRDAI
Indian FRBs have welcomed the new measures saying lower capital requirements may help specialised reinsurance players in the areas like surety / trade credit/cyber setting up operations in India
Hyderabad:
In a significant move, the Insurance Regulatory and Development Authority of India (IRDAI) has lowered the minimum capital requirement for Foreign Reinsurance Branches (FRBs) from Rs100 crore to Rs 50 crore, with the provision to repatriate any excess assigned capital.
Also the order of preference, which has to be followed by a cedant while placing its reinsurance deal, has been streamlined to four levels from six levels. The format for reinsurance programs has been simplified, and regulatory reporting requirements have been rationalised for increased clarity and effectiveness.
IRDAI has approved a series of amendments to the Reinsurance Regulations during its 123rd authority meeting on last Friday and have been already made effective aiming at promoting a favorable business environment and attracting more reinsurers to establish operations in India
There are currently 12 FRBs, including top six global players like Munich Re, Swiss Re, Hannover Re, SCOR and Lloyd’s, operating in India mobilising over Rs 20,000 crore of of premium. State owned GIC Re is the sole Indian reinsurer in the country.
The overarching objective of these amendments is to harmonize and streamline the existing regulations that apply to Indian insurers, Indian reinsurers,FRBs, and International Financial Services Centre Insurance Offices(IIOs). The regulatory framework for IIOs has been aligned with IFSCA regulations with the intent to remove dual compliance, thereby promoting a seamless integration of these entities into the larger financial ecosystem, said the IRDAI.
This comprehensive regulatory overhaul is strategically designed to position India as a prominent global reinsurance hub. The revised Order of Preference for IIOs, coupled with simplified regulations and improved placement alongside FRBs, fosters a more competitive environment, added the IRDAI.
Indian FRBs have welcomed the new measures saying the lower capital requirements may help specialised reinsurance players in the areas like surety / trade credit/cyber setting up operations in India.
“More interesting is the easing of the capital repatriation norms will foster more confidence in bringing operations out of India,” said FRB sources adding that there is absolutely no reason why Middle East, African and South/Southeast Asian business cannot be done maJorly out of India as traditionally there are very strong Indian connections with these markets,” said analysts from Indian FRBs.
New breed of FRBs also need good ratings to do reinsurance business, said analysts.
However,none of the existing Indian FRBs have any plans to return their capital.
The four slabs, instead of earlier six, which have to be followed by an Indian cedant as a matter of Order of Preference while placing its reinsurance business are –
-Category 1: Indian Reinsurers(only GIC Re at present),
-Category 2: IIOs (which invest 100 per cent of retained premiums emanating from insurers in India, in the DTA) and FRBs,
-Category 3: other IIOs.
-Category 4: Other Indian Insurers (only in respect of per-risk facultative placements in the insurance segment for which the Insurer is registered to transact business) and cross boarder reinsurers (CBRs).
The amended Order of Preference for IIOs and FRBs will increase competitiveness, benefiting the sector. The reduced barriers to entry into the Indian market would be welcomed by multinational businesses and should hasten their investment plans. The increased supply is going to ensure premium efficiency in favour of the cedants, said .Prateek Singhal, reinsurance head,- Howden Insurance Brokers India
By working in tandem with the International Financial Services Centres Authority (IFSCA), IRDAI aims to cultivate an environment conducive to the growth of reinsurance activities, both within and outside the conventional Indian market, said the IRDAI.
Another vital aspect is the reduction of the compliance burden on various entities operating in the sector, allowing them to navigate the regulatory landscape more efficiently.
Several noteworthy changes have been made in this regard.
The amendments introduced by IRDAI represent a significant leap forward in the Indian reinsurance landscape. By simplifying regulations, enhancing competitiveness, and aligning with global financial services trends, these changes signal regulatory intent to establish India as a leading global reinsurance hub.
There is a concerted effort to increase the overall capacity of the reinsurance sector, which can help accommodate growing demand and manage larger risks. Additionally, these amendments seek to enhance technical expertise within the industry, fostering an environment of excellence and innovation.
As the amendments take effect and the reinsurance market in India evolves, the insurance sector is poised to witness accelerated growth, increased international recognition, and a more robust ecosystem overall, said the Indian insurance regulator.