Hyderabad:
Even as a new set of guidelines from the IRDAI on reinsurance placement in the Indian market is being keenly awaited upon, the insurance regulator has asked the general insurers to strictly comply with its existing norms on “Order of Preference’’ while placing their reinsurance deals.
“ We are informed that some of the insurers are not complying with the existing norms on order of placement . Insurers are advised to strictly adhere to the said regulation in order to avoid any regulatory action,’’ said an order signed by PJ Joseph, member(non-life), IRDAI on Wednesday.
The IRDAI might have noticed some act irregularities committed by the general insurers with regard to the compliance of the existing reinsurnace norms, hence has cautioned the players,'' industry sources.
According to the existing norms- Regulation 5 of IRDAI (Registration and Operations of Branch Offices of Foreign Reinsurers other than Lloyd’s) (First Amendment) Regulations in operations since Feb 28, 2016-every Indian insurer has to obtain best terms for their facultative and treaty surpluses from Indian reinsurer(s) having a minimum credit rating from any of the internationally renowned credit rating agencies for the previous three years and also from at least three other licensed reinsurers in the country.
Then, the Indian insurer in a descending order, has to offer the best terms for participation in the order of preference to the GIC Re, foreign reinsurers who have set up branch operations in the country including Lloyd’s of London, the branch offices of foreign reinsurers set up in Special Economic Zone and lastly the balance to Indian insurers and overseas reinsurers.
Though, there are currently two licensed Indian reinsurers- the state owned GIC Re and ITI Sudhir Valia owned ITI Re – only GIC Re is participating in the order of preference as ITI Re is not doing any business because of some technical problems.
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Meanwhile, the IRDAI had issued the draft IRDAI (Reinsurance) Regulations, 2018 (the Draft Regulations) on 05 January, 2018. The draft regulations have sought to bring out significant changes to the existing regulatory framework/regulations relating to reinsurance particularly with reference to the categories of reinsurers, order of preference, retention limits, etc.
The Draft Regulations have been issued considering the recommendations made by the Expert Committee on Reinsurance headed by M Ramprasad, former member,IRDAI which was constituted by IRDAI.
However, after getting the feed-back from the insurance industry, IRDAI is yet to unveil the final norms which is now overdue.