The insurance regulator IRDAI has asked insurance companies to comply strictly with the order of preference when giving out reinsurance contracts.
The current order is first preference to be given to an Indian reinsurer having a prescribed credit rating, followed by local branches of foreign reinsurers.
“We are informed that some of the insurers are not complying with the above. Insurers are advised to strictly adhere to the said regulation in order to avoid any regulatory action,” IRDAI said in a circular last week.
The order of preference has been a matter of contention between Indian reinsurers and the branches of global reinsurers. While the current regulations give preference to GIC Re, foreign reinsurers are seeking to be treated on par with their Indian counterparts, reports Moneycontrol.
Although a discussion paper on this issue has been drawn up, a final decision on any changes in this order of preference is yet to be taken by the IRDAI.
In November 2017, the reinsurance expert committee constituted by IRDAI had recommended that the order of preference in reinsurance cessions should be GIC Re and then [simultaneously to other] Indian reinsurers, cross-border reinsurers (CBRs), foreign reinsurance branches (FRBs), Lloyd’s India and Indian insurers.
The size of the reinsurance market in India is estimated to be about INR300 billion (US$4.6 billion), of which life business contributes less than 5%. The rest is constituted by general insurance business.