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What is Reinsurance?

The Reinsurance Programme shall continue with the following objectives to :
Insurance Regulatory and Development Authority (IRDA) Act, 1999 will apply to reinsurance in India. According to this act following procedure should be followed by the reinsurance company while making reinsurance arrangements

  • Maximize retention within the country;
  • Develop adequate capacity;
  • Secure the best possible protection for the reinsurance costs incurred;
  • Simplify the administration of business.

Every insurer should maintain the maximum possible retention commensurate with its financial strength and volume of business. The Authority may ask an insurer to justify its retention policy and may give instructions as necessary to ensure that the Indian insurer is not merely fronting for a foreign insurer.

Every insurer should give some percentage of the sum guaranteed on each policy for different classes of insurance written in India to the Indian reinsurer as it may be specified by the Authority in accordance with the provisions of Part IVA of the Insurance Act, 1938.

The reinsurance programme of every insurer must begin from the beginning of every financial year and every insurer should submit his reinsurance programmes to the Authority which is related to the forthcoming year within 45 days before the commencement of the financial year.

Every insurer shall file with the Authority a photocopy of every reinsurance agreement slip and excess of loss cover under cover note in respect of that year together with the list of reinsurers and their shares in the reinsurance arrangement; Within 30 days of the commencement of the financial year

The Authority may call for further information or explanations of an insurer in respect of the reinsurance programme and may issue such direction, as it considers necessary ;

Insurers shall place their reinsurance business outside India only with those reinsurers who have over a period of the past five years counting from the year preceding for which the business has to be placed, enjoyed a rating of at least BBB (with Standard & Poor) or equivalent rating of any other international rating agency. Placements with other reinsurers must need the approval of the Authority. Insurers may also place reinsurances with Lloyd’s syndicates taking care to limit placements with individual syndicates to such shares as are commensurate with the capacity of the syndicate.

The Indian Reinsurer should organize domestic pools for reinsurance surpluses in fire, marine hull and other classes in consultation with all insurers on basis, limits and terms which are fair to all insurers and assist in maintaining the retention of business within India as close to the level achieved for the year 1999-2000 as possible. The arrangements so made shall be submitted to the Authority within three months of these regulations coming into force, for approval.

Surplus which is over and above the domestic reinsurance arrangements class wise can be placed by the insurer independently with any of the reinsurers which is complying with sub-regulation (7) subject to a limit of 10% of the total reinsurance premium ceded outside India being placed with any one reinsurer. Where it is necessary in respect of specialized insurance to cede a share exceeding such limit to any particular reinsurer, the insurer may seek the specific approval of the Authority giving reasons for such cession.

Surplus which is over and above the domestic reinsurance arrangements class wise can be placed by the insurer independently with any of the reinsurers which is complying with sub-regulation (7) subject to a limit of 10% of the total reinsurance premium ceded outside India being placed with any one reinsurer. Where it is necessary in respect of specialized insurance to cede a share exceeding such limit to any particular reinsurer, the insurer may seek the specific approval of the Authority giving reasons for such session.

Surplus which is over and above the domestic reinsurance arrangements class wise can be placed by the insurer independently with any of the reinsurers which is complying with sub-regulation (7) subject to a limit of 10% of the total reinsurance premium ceded outside India being placed with any one reinsurer. Where it is necessary in respect of specialized insurance to cede a share exceeding such limit to any particular reinsurer, the insurer may seek the specific approval of the Authority giving reasons for such session.

Every insurer must offer an opportunity to other Indian insurers, including the Indian Reinsurer to participate in its facultative and treaty surpluses before placement of such cessions outside India.

The Indian Reinsurer shall retrocede at least 50% of the obligatory cessions received by it to the ceding insurers after protecting the portfolio by suitable excess of loss covers. Such retrocession shall be at original terms plus an over-riding commission to the Indian Reinsurer not exceeding 2.5%. The retrocession to each ceding insurer shall be in proportion to its cessions to the Indian Reinsurer.

Every insurer shall be required to submit to the Authority statistics relating to its reinsurance transactions in such forms as the Authority may specify, together with its annual accounts.

Insurance
Term Insurance