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Home / IRDA Update 

IRDA issues draft on non-life reinsurance

The Insurance Regulatory and Development Authority (IRDA) has issued draft guidelines for reinsurance in the non-life sector. At present, the General Insurance Corporation handles the majority of non-life insurance business.

The draft for the domestic reinsurance business says that a "national reinsurer will be notified under section 101 A of the Insurance Act, 1983. There will be a statutory cession of 20 percent on all direct business written in India on a 'quota share basis' in favor of the national reinsure subject to overall limits." 

The national reinsurer will not only utilise the surplus generated but also facilitate the formation of market pools so that maximum retention within the country is achieved. The primary measures in the draft include maximisation of retention within the country, development of adequate reinsurance capacity for the industry, best possible protection for reinsurance costs and to simplify the administration of the business.

For the individual insurer, the guidelines shall commence from the first day of every financial year. The entity will have to submit to the authority its reinsurance programme 4-5 days before the inception of the new financial year.

The authority will have a committee to resolve disputes consisting of three members, one of whom will be from the authority, one as a representative of the reinsurers and one as a representative of the intermediaries specialising with reinsurance.

The committee will respond to complaints given by any of the parties, and after examining all facts, give a decision in a time-bound manner. Any insurer or reinsurer not acting on the basis of the guidelines issued by IRDA is liable for action under the Insurance Act 1983 or the IRDA Act, 1999 and that includes cancellation of registration granted by the authority.

Violating any of the regulations will also result in a penalty of Rs.5,000/- in the first offense and Rs.1,00,000/- in the subsequent offenses. A further recurrence would result in termination of license. The draft also adds that the insurance broker will be given a chance to heard the levy of penalty is decided.

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