Non-life insurers cede 5% risks compulsorily to the reinsurer
Life insurance companies may have to transfer up to 30% of their risks mandatorily to General Insurance Corporation of India (GIC Re), the state owned sole national reinsurer.
A K Roy, chairman and managing director of GIC Re said that the reinsurer would be very happy if 30% mandatory cession is approved by the insurance regulator.
In the Irda (Life Insurance-Reinsurance) Regulations, 2013 notified in the gazette, Insurance Regulatory and Development Authority (Irda) mandated life insurance companies to reinsure with domestic reinsurers, a percentage of sum assured, on each policy. The regulator had said that this percentage will be notified by the regulator and will not exceed 30% of the sum assured. Hence, it could be anywhere between 0-30%.
GIC Re has taken up the matter with the regulator to fix this percentage and has sought obligatory ceding from the life insurers of up to 30%. Presently, only general insurance companies have mandatory cession. Mandatory cession to GIC means that out of the total risks, a fixed percentage has to be reinsured with the national reinsurer.
Though non-life players were earlier mandated to transfer 10% of their risks to GIC Re, it has been reduced to 5% for this financial year. This fixed cession could vary from one year to the other and is decided by the regulator. The Irda guidelines seek to retain maximum reinsurance business within the country. Industry experts said that this would make the Indian reinsurance industry more healthy since more business would be retained in India.
Life insurance companies are mostly dependent mostly on foreign reinsurance firms. Since the risks and losses in this segment are lower, industry players said that mandatory ceding of risks within the country to GIC Re would be a boost to the latter's business. Roy had earlier said that apart from India, GIC would also be looking at international markets to source business in life segment.
For 2012-13 financial year, GIC Re wrote a gross global premium of Rs 15,086 crore, registering a growth of 10.8% over the previous year. It posted a profit after tax of Rs 2,345 crore for financial year 2012-13, as compared to loss of Rs 2,469 crore for 2011-12.
The Irda guidelines seek to retain maximum reinsurance business within the country. Industry experts said that this would make the Indian reinsurance industry more healthy since more business would be retained in India.
General insurance business is considered a riskier proposition due to the high losses in segments like motor insurance. Last year, Roy had said that they had faced about Rs 3,000 crore in the last three to four years due to the obligatory cession. This loss was faced as GIC Re has to partake 10% of the loss faced by insurers in policies. Since the underwritten policies on segments like motor insurance have been facing losses, this has been passed on to GIC Re.
Life insurance companies may have to transfer up to 30% of their risks mandatorily to General Insurance Corporation of India (GIC Re), the state owned sole national reinsurer.
A K Roy, chairman and managing director of GIC Re said that the reinsurer would be very happy if 30% mandatory cession is approved by the insurance regulator.
In the Irda (Life Insurance-Reinsurance) Regulations, 2013 notified in the gazette, Insurance Regulatory and Development Authority (Irda) mandated life insurance companies to reinsure with domestic reinsurers, a percentage of sum assured, on each policy. The regulator had said that this percentage will be notified by the regulator and will not exceed 30% of the sum assured. Hence, it could be anywhere between 0-30%.
GIC Re has taken up the matter with the regulator to fix this percentage and has sought obligatory ceding from the life insurers of up to 30%. Presently, only general insurance companies have mandatory cession. Mandatory cession to GIC means that out of the total risks, a fixed percentage has to be reinsured with the national reinsurer.
Though non-life players were earlier mandated to transfer 10% of their risks to GIC Re, it has been reduced to 5% for this financial year. This fixed cession could vary from one year to the other and is decided by the regulator. The Irda guidelines seek to retain maximum reinsurance business within the country. Industry experts said that this would make the Indian reinsurance industry more healthy since more business would be retained in India.
Life insurance companies are mostly dependent mostly on foreign reinsurance firms. Since the risks and losses in this segment are lower, industry players said that mandatory ceding of risks within the country to GIC Re would be a boost to the latter's business. Roy had earlier said that apart from India, GIC would also be looking at international markets to source business in life segment.
For 2012-13 financial year, GIC Re wrote a gross global premium of Rs 15,086 crore, registering a growth of 10.8% over the previous year. It posted a profit after tax of Rs 2,345 crore for financial year 2012-13, as compared to loss of Rs 2,469 crore for 2011-12.
The Irda guidelines seek to retain maximum reinsurance business within the country. Industry experts said that this would make the Indian reinsurance industry more healthy since more business would be retained in India.
General insurance business is considered a riskier proposition due to the high losses in segments like motor insurance. Last year, Roy had said that they had faced about Rs 3,000 crore in the last three to four years due to the obligatory cession. This loss was faced as GIC Re has to partake 10% of the loss faced by insurers in policies. Since the underwritten policies on segments like motor insurance have been facing losses, this has been passed on to GIC Re.
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