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Insurance Regulatory and Development Authority of India (IRDAI) has brought out draft regulations for registration and operations of branch offices of foreign reinsurers (excluding Lloyd’s). The regulator said that the branch office of the foreign reinsurer shall have a minimum retention of 50% of the business written in India.
After the Insurance Laws (Amendment) Act, 2015 has been passed, foreign reinsurers are being permitted to set up branch office in the country. IRDAI said that there shall be a two-stage process for approval as followed for other insurers. While the first stage will be decided by the Authority, the second stage will be completed at the level of Chairman, IRDAI.
The eligibility norms shall include obtained in-principle clearance from the home country regulator, foreign reinsurer registered in national regulatory environment, net owned funds of Rs 5,000 crore, minimum credit rating of “BBB+” from international credit rating agencies. It needs to be in operations for atleast 10 years, with a minimum assigned capital of Rs 50 crores among other requirements.
The regulator said that the branch office shall be capable of underwriting risks and settle claims. Here, the minimum assigned capital shall remain invested in Government of India securities or deposits with the scheduled banks in the country.
The branch of the foreign reinsurer shall be subject to the same reinsurance regulations as applicable to Indian insurer and reinsurer. The regulator said that every Indian insurer, in order of priority, shall first offer an opportunity to the India Reinsurer to participate in its facultative and treaty surpluses. It shall next offer an opportunity to Indian insurers, Branch Office of foreign reinsurers or Lloyd’s office in India to participate in its facultative and treaty surpluses.
IRDAI said that next it shall offer the offices of foreign reinsurers set-up in Special Economic Zone to participate in its facultative and treaty surpluses. The balance of the Indian insurers' facultative and treaty surpluses shall then be offered to overseas reinsurers.
