Insurance companies can now settle their inter-company balances in a quicker and easier manner, thanks to the Insurance Clearing House (ICH), proposed by the Insurance Regulatory and Development Authority (Irda).
In a draft proposal released recently, Irda had said inter-company balances in reinsurance and coinsurance businesses were at very high levels and still rising. In order to enable timely and effective reconciliation of these balances as well as to achieve transparency, the insurance regulator said a clearing house be established.
"This is a positive step for the industry. At the end of the day, reinsurance and coinsurance are the normal business of general insurance companies and form bloodlines. The industry is ready for it and it will enable us to have a consolidated group to undertake the transactions, in a scientific manner." said K K Mishra, CEO of Tata AIG General Insurance.
ICH will clear the reconciliation and settlement of inter-company balances through Electronic Transaction Administration and Settlement System, an electronic platform on which the reinsurance and coinsurance business in India is conducted by all parties - insurers, reinsurers, and brokers among others. ICH will have a CEO and a compliance officer to enforce its business objectives.
According to insurance experts, once the clearing house is set up, it will enable them to settle balances without any conflicts. "Some settlements involve a lot of complexity, since different companies operate on different platforms. With the ICH being set up, this will be the singular platform for the transactions," said a senior private life insurance executive.
With coinsurance contracts also coming under ICH's ambit, the CEO of a general insurance firm said this will help them in settling customer dues in a quicker manner.
