The government has notified the move, on Friday, saying that the entire Obligatory Cession is to be placed with General Insurance Corporation of India (GIC Re) only though there are two other Indian reinsurers- Valueattics Reinsurance Company and Allianz Jio Reinsurance-have started operations in the country
Hyderabad:The Indian insurance regulator IRDAI, for the fourth year, has retained its “Obligatory Cession’ for state owned GIC Re at 4% for the FY 2025-26.
The government has notified the move, on Friday, saying that the entire Obligatory Cession is to be placed with General Insurance Corporation of India (GIC Re) only though there are two other Indian reinsurers- Valueattics Reinsurance Company and Allianz Jio Reinsurance- have started operations in the country.
Obligatory cession refers to the part of the business that general insurance companies have to mandatorily reinsure with GIC Re.
To begin with, it was 20 per cent and reduced to 4 per cent over a period of time. The obligatory cession was reduced from 5 per cent to 4 per cent in FY23.
In exercise of the powers conferred by Sub-section (2) and (4) of the Section 101A of the Insurance Act, 1938, the IRDAI, after consultation with the Advisory Committee, constituted under section 101B of the Insurance Act, 1938 and with the previous approval of the Central Government, has announced “Obligatory Cession for the FY 2026-27.
Percentage of Cession: The percentage cession of the sum insured on each General Insurance Policy to be reinsured with the Indian Re-insurer(s) will be 4 per cent in respect of insurance attaching during the financial year beginning from 1st April, 2026 to 31st March, 2027, except the terrorism premium and premium ceded to Nuclear pool wherein it would be made ‘NIL’.
Terms & Conditions:
There would be no limit on sum insured applicable for the cessions made during the period from 1st April,2026 to 31st March, 2027.
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 will inform the Indian Re-insurer at all times whenever the cession exceeds such specified limits.
Commission:
-Percentage of commission on obligatory cession for different classes of business shall be as follows:
-Minimum 5 per cent for Motor TP and Oil & Energy insurance,.
-Minimum 10 per cent for Group Health insurance,.
-Minimum 7.50 per cent 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 the following:
-Incurred loss % (to be worked at the end of 3 financial years),.
-Management Expenses at 2 per cent
-Profit at 5%,
-Commission at 12.5 per cent.