The Reinsurance Advisory Board (RAB) has responded to a consultation by the Insurance Regulatory and Development Authority of India (IRDAI) on a draft amendments to its reinsurance regulations.
The IRDAI’s proposed changes on order of preference would deliver positive developments towards a more open and balanced reinsurance market, the RAB concludes.
The specialist representative body for the European reinsurance industry said it welcomed the changes, but also called for the removal of remaining unnecessary barriers for foreign carriers.
The Board expressed approval for the move to bring foreign reinsurance branches (FRBs), Lloyd’s India and International Financial Services Centre Insurance Offices (IIOs) on a par with the state reinsurance company.
However, it added that such changes should be made in conjunction with other amendments to existing laws and regulations to create a proper level playing field for FRBs.
In particular, it argues that FRBs should be considered as being resident under the Income Tax Act.
In addition, the RAB asserts that requirements for the maintenance of assigned capital or repatriation of capital/surplus applicable to FRBs should be removed or eased.
“Restrictions on the outsourcing of functions severely affect the ability of FRBs to benefit from processes from other entities in their group or from best-in-class global service providers,” it argued.
Furthermore, the RAB opposes the proposed requirement for cross-border reinsurers (CBRs) to retain 50% of premium with their cedants by way of collateral.
Similarly, the it recommends removing the 50% retention of reinsurance premium by locally domiciled branches of foreign reinsurers.
And, while the RAB supports the increase in the maximum cession limit for CBRs, it also urges the IRDAI to reconsider its current regime of restrictive practices and to pursue a regime under which all cession limits are lifted.
