Asian News - India: Foreign reinsurers reviewing plans for branches following loss of parity
Source: Asia Insurance Review | Jan 2016
Global reinsurance companies are reviewing their plans to set up branches in India following a proposed rule change by the Insurance Regulatory and Development Authority of India (IRDAI) to grant the first right of refusal for risks underwritten in the country to the state-owned and sole local reinsurer GIC Re.
About half a dozen reinsurers had applied to IRDAI after the Insurance Act amended in March allowed overseas firms to set up shop in India and IRDAI had issued regulations allowing foreign reinsurers with a 50% minimum retention to have parity with GIC Re and local insurers in cessions. Some are reviewing their plans, according to a report in the Economic Times.
But IRDAI said in a notice released last month that “based on the advice received from the Government of India” in a meeting on 24 November 2015, it proposed to amend the regulations to require Indian insurers to first offer to the “Indian reinsurer” the choice to participate in their facultative and treaty surpluses before other players.
Under the proposed change, Indian insurers will also lose their priority in being offered reinsurance business. The order of priority remains unchanged for those next in line which are foreign reinsurers that maintain 30% minimum retention of business on their books, followed by foreign reinsurers operating in Special Economic Zones. The balance shall then be offered to overseas reinsurers.
This is the third time that the regulations on foreign reinsurers have undergone a change. In the first draft in April last year, IRDAI had proposed giving preference to GIC. However, after foreign reinsurers expressed reservations, a second draft was issued last May whereby insurance companies, while entering into reinsurance deals, would deal with the Indian reinsurer (GIC Re) or other registered reinsurers or Indian insurance companies.