New reinsurance regulations that took effect on 1 January are credit positive for the Indian insurance industry because they will improve Indian insurers' access to a broader reinsurance base, which will support their management of underwriting risk and performance, according to Moody's Investor Service.
On 12 December 2018, the IRDAI published the Insurance Regulatory and Development Authority of India (Re-insurance) Regulations, 2018.
Under these new regulations, the Indian reinsurers retain the first right of refusal. Cedants have to seek terms from all Indian reinsurers which have undertaken reinsurance business continuously during the immediately preceding three years and from at least four foreign reinsurance branches, allowing the non-Indian reinsurers to compete for business on equal terms with Indian reinsurers.
Previously, Indian reinsurers have the first preference and right of refusal, but the only active India-based reinsurer is state-owned GIC Re. Non-domestic reinsurers were offered business if only Indian reinsurers refused the business.
The IRDAI's new reinsurance regulations are another step towards liberalising the reinsurance market which, according to industry estimates, totals INR450bn ($6.3bn) to INR500bn. They will provide local insurers broader access to foreign reinsurers and encourage the latter to sharpen their use of reinsurance as a risk management tool with the aim to reduce P&L and balance sheet volatility.
Currently, foreign global reinsurers present in India include Gen Re, Munich Re, Swiss Re, SCOR, AXA France Vie, RGA Re, XL Re, Hannover Re and Lloyd's of London.