While Indian life insurers already have reinsurance contracts with India's sole reinsurer General Insurance Corporation of India (GIC Re), there was no mandate earlier to reinsure a percentage of sum assured with GIC. Further, Irda has asked life insurers, in their Reinsurance Programme, to have maximum retention within the country.
GIC Re has welcomed the move. A K Roy, chairman and managing director of GIC Re said, "This would make the industry more healthy, as more retention within India would happen. Old insurers would have a higher retention limit, while newer insurers would have a lower limit," he said.
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As per the gazette notification, the retention limit ranges from Rs 5 lakhs to Rs 30 lakhs, based on the age of the insurer and the type of the product. For instance, a pure protection product like term, insurance and personal accident product would have a retention limit of Rs 5 lakh for a 0-3 year old insurer. But the same products for 12-15 year old insurer would attract Rs 20 lakh retention limit.
Further, Irda has also asked insurers to have reinsurance arrangements with only those foreign companies, who have had a minimum credit rating of BBB (with S&P) over the past five years. It has said that if reinsurance premium to total premium exceeds 2 per cent for savings and 30 per cent for term and health insurance, detailed working for each product is required to be reported to Irda.