The Insurance Regulatory Authority of India (IRDAI) has announced that it will retain its first preference rules, which require that cedants give first refusal in reinsurance contracts to the country’s only active domestic reinsurer, GIC Re.
Newly released reinsurance regulations state that from 1 January 2019 insurers will have to give preference to Indian reinsurers that have been operating for more than three years.
If GIC Re refuses a contract, foreign reinsurance companies with branches in India will be allowed to bid for it on par with domestic reinsurers that have been operating for less than three years.
“The old order of preference is retained and GIC Re is in an advantageous position as before,’’ said Alice Vaidyan, Chairman and Managing Director of GIC Re.
The new regulations also require that every Indian insurer maintain the maximum possible retention in commensuration with its financial strength, quality of risks and volume of business.
In life insurance, IRDAI said insurers should maintain a minimum retention of 25% of sum at risk under pure protection, and 50% for other categories of products.
In October, IRDAI announced that it planned to maintain its order of preference rules despite pressure from the global re/insurance industry to relax the policy.
State-owned GIC Re remains the only active domestic reinsurance company in India, although foreign reinsurers have been allowed to open branches in the country since 2015.
Several global reinsurers currently operate branches in the Indian market, including Munich Re, Swiss Re, SCOR, Hannover Re, RGA, XL, Gen Re and AXA, as well as re/insurance marketplace Lloyd’s of London.
The country’s reinsurance market is worth around Rs 45,000 crore (US $6.3 billion), although only a negligible portion of it is contributed by branches of foreign reinsurers.
IRDAI adopted its order of preference policy in 2016 despite objection from the Insurance Broker’s Association of India, the Global Reinsurance Forum and the Global Federation of Insurance Associations, which argued that the regulations suppressed competition.
In February 2018, IRDAI delayed setting new regulations, which led to speculation that order of preference rules might be waived for a number of major insurance lines, but the regulator issued a reminder in April to enforce the policy.
The coverage of this story that Reinsurance News originally published on the 12th December contained a number of inaccuracies and has since been updated.