India’s insurance and reinsurance industry regulator, the Insurance Regulatory and Development Authority of India (IRDAI), has announced plans to lower the country’s obligatory reinsurance cession rate by 1% for the 2022 to 2023 financial year.
Currently, insurers are required to cede 5% of the sum insured on each general insurance policy to an Indian reinsurer.
But now, a notice from the regulator explains that the mandatory cession rate will be reduced to 4% in the next financial year.
State-owned reinsurer GIC Re is the only domestic reinsurer operating in India at present, since ITI Re’s licence was pulled in 2019.
A number of foreign reinsurers have gained a foothold in India during recent years, but the notice from IRDAI explicitly states that the obligatory cession from insurers is “to be placed with General Insurance Corporation of India (GIC Re) only.”
IRDAI also laid out the commission rates on obligatory cession for different classes of business and the basis for sharing the profit commission, but these rules remain unchanged.
The only business excluded from the obligatory reinsurance cession rate are terrorism and nuclear insurance premiums, as these risks are covered by risk pools in India.
Over the past two years there has been speculation that India’s regulator could consider the establishment of further risk pools both for catastrophe risks and for pandemic.
