Insurance Regulatory and Development Authority (Irda) has mandated life insurance companies to reinsure with domestic reinsurers, a percentage of sum assured, on each policy. In the Irda (Life Insurance-Reinsurance) Regulations, 2013 notified in the gazette, it said that this percentage will be notified by the regulator and will not exceed 30 per cent of the sum assured.
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.
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.
