India: IRDAI issues new draft rules for foreign reinsurers
Source: Asia Insurance Review | May 2015
IRDAI has brought out draft regulations for registration and operations of branch offices of foreign reinsurers, excluding Lloyd’s.
The regulator said that the branch office of the foreign reinsurer shall have a minimum retention of 50% of the business written in India.
After the Insurance Laws (Amendment) Act, 2015 was passed, foreign reinsurers are being permitted to set up a branch office in the country. IRDAI said that there shall be a two-stage process for approval as followed by direct insurers. While the first stage will be decided by the Authority, the second stage will be completed at the level of Chairman, IRDAI.
The eligibility norms shall include obtained in-principle clearance from the home country regulator, foreign reinsurer registered in national regulatory environment, net owned funds of INR5,000 crore (US$800 million), minimum credit rating of “BBB+” from international credit rating agencies. It needs to be in operation for at least 10 years, with a minimum assigned capital of INR50 crores (US$8 million) among other requirements.
The regulator said that the branch office shall be capable of underwriting risks and settling claims. The minimum assigned capital shall remain invested in Government of India securities or deposits with the scheduled banks in the country.
The branch of the foreign reinsurer shall be subject to the same reinsurance regulations as applicable to Indian insurers and reinsurer. The regulator said that every Indian insurer, in order of priority, shall first offer an opportunity to the Indian reinsurer to participate in its facultative and treaty surpluses. It shall next offer an opportunity to Indian insurers, branch offices of foreign reinsurers or Lloyd’s office in India and only then can the balance of the Indian insurers’ facultative and treaty surpluses be offered to overseas reinsurers.