The Insurance Regulatory and Development Authority of India (IRDAI) may permit reinsurance companies to invest in overseas financial instruments, such as sovereign bonds, in an effort to reduce the risk of their global portfolio and promote the country as a major reinsurance hub, according to the Economic Times.
A source close to the development told the publication that: “The insurance regulator is working on relaxing investment norms for reinsurance companies, allowing them to invest outside India to diversify their risks.
“Irdai is likely to allow these companies to invest in sovereign debt of other countries with A- and above rating. Irdai is studying the regulations of other countries.”
GIC Re currently remains the only active domestic reinsurance company in India, although foreign reinsurers have been allowed to open branches in the country since 2015.
India also continues to implement an ‘order of preference’ rule that favours domestic reinsurers, and only allows foreign companies to take 50% of the premium earned in India to their parent, requiring the rest to be invested in the country.
Eight foreign reinsurance companies currently operate through branches in India, including Munich Re, Swiss Re, SCOR, Hannover Re, and ITI Reinsurance, although a number of others are awaiting approval from Irdai.
Another source told the Economic Times: “All reinsurance companies registered with Irdai will be allowed to invest outside India to diversify the risk. This will need a change in regulations and Irdai will have to come up with a notification. The regulations will be an outcome of a consultative process involving all stakeholders.”
