India's first private reinsurance company, ITI Reinsurance (ITI Re), is ready to surrender its licence, arguing that current reinsurance regulations are illogical and create an uneven playing field.
ITI Re, which received the IRDAI's final approval for a reinsurance licence last December, is promoted by listed Fortune Financial Services (India) (FFSIL) which in turn is promoted by Mr Sudhir Valia.
Under the rules, primary insurers in India are to reinsure with a domestic reinsurer which has a credit rating that signifies financial stability for the past three years.
"How can a new company like ours have a credit rating for three years," said ITI Re's COO Mr R Raghavan to the Indo-Asian News Service (IANS). He urged the IRDAI to remove the three-year credit rating criteria for new reinsurers to enable them to secure business from primary insurers.
The issue has been brewing for some time. In March, ITI wrote to IRDAI, asking that it be given a share of the reinsurance premiums which go to government-owned GIC Re under existing rules. GIC Re reported gross premiums of INR335.85 billlion (US$5.2 billion) in the financial year ended March 2017.
Mr Valia told IANS that the obligatory cession rule continues to be skewed and other regulations have not been suitably changed.
Mr D Varadarajan, a Supreme Court advocate specialising in company, competition and insurance laws, said: “The regulation is not only illogical but also anti-competitive."
Mr Varadarajan said that the IRDAI had granted the licence to ITI Re after proper due diligence.
He sees no impediment to ITI Re exiting the market as the company has not underwritten any risk since it received its licence in December 2016.
Fortune Financial has invested INR5 billion in ITI Re, which is asking that INR15 billion of obligatory cessions be reserved for it.
Mr Raghavan said: “Unless a nurturing policy for new entrants is implemented in obligatory cessions, building up domestic reinsurance capacity will continue to be the mirage that it has been for the last 17 years or so."