The Insurance Regulatory and Development Authority of India (IRDAI) has decided to maintain its established ‘order of preference’ guidelines, which grant GIC Re first refusal to all reinsurance business placed in India, according to sources at BloombergQuint.
The new regulations were finalised at a meeting on 28 September and will come into effect from March 2019 when reinsurance contracts are renewed for the next year, people present at the Board meeting told the publication.
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 regulation requires that local insurers give preference to state-owned domestic reinsurer GIC Re for all reinsurance business, followed by other Indian reinsurers that have been doing business for at least three consecutive years.
If both GIC Re and other Indian reinsurers refuse the business, preference is given to foreign reinsurance branches in the country.
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.
Additionally, if at least four foreign reinsurance branches refuse to underwrite risk, preference goes to insurance offices in International Financial Services Centre, GIFT City, and then finally to ‘A-‘ rated cross-border reinsurers if this too is refused.
In June, IRDAI also announced that it was to permit domestic 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.
