The Insurance Regulatory and Development Authority of India (IRDAI) may allow reinsurance companies to invest in overseas financial instruments in an effort to reduce the risk of their global portfolio and promote the country as a major reinsurance hub, according to reports.
A source close to the development told The Economics Times that the insurance regulator is working on relaxing investment norms for reinsurance companies, allowing them to invest outside India to diversify their risks.
“IRDAI is likely to allow these companies to invest in sovereign debt of other countries with A- and above rating. IRDAI is studying the regulations of other countries,” they added.
GIC Re currently remains the only active domestic reinsurance company in India, however other foreign reinsurance companies that have set up branches in India are increasing their share.
Foreign reinsurers can only take a 50 percent share of the premium earned in India to their parent, while the remainder has to be invested in the country.
Eight foreign reinsurance companies currently operate through branches in India, including Munich Re, Swiss Re, SCOR, Hannover Re, and ITI Reinsurance, although a number of others are awaiting approval from IRDAI.
Another source told the publication: “All reinsurance companies registered with IRDAI will be allowed to invest outside India to diversify the risk. This will need a change in regulations and IRDAI will have to come up with a notification. The regulations will be an outcome of a consultative process involving all stakeholders.”