The Insurance Regulatory and Development Authority of India (IRDAI) has maintained its established ‘order of preference’ guidelines, which grant GIC Re first refusal to all reinsurance business placed in India, according to sources at BloombergQuint.
The new regulations will govern the terms for reinsurance business in India and will reportedly come into effect from March 2019 when reinsurance contracts are renewed for the following year.
IRDAI adopted the order of preference recommended by its expert committee on 5 January despite objections from Insurance Brokers’ Association of India, Global Reinsurance Forum that represents over 67 percent of the world’s reinsurance capacity, and Global Federation of Insurance Associations representing insurance industry of 60 countries that account for around 87 percent of total insurance premiums worldwide. The organisations had called the suggestions anti-competitive since they allowed GIC Re to maintain its monopoly.
According to BloombergQuint sources, after GIC RE, the second preference will be given to other Indian reinsurers that have been doing business in the country for at least three consecutive years. In case both GIC Re and Indian reinsurers refuse, third preference will be given to foreign reinsurance branches in the country.
As of now, GIC Re is the sole domestic reinsurer and its nine foreign peers have local offices.
The fourth preference, if at least four foreign reinsurance branches refuse to underwrite risk, will go to insurance offices in International Financial Services Centre, GIFT City—the tax-free hub set up in Prime Minister Narendra Modi’s home state Gujarat.
If they refuse too, the insurer can then obtain best terms for reinsurance from cross-border reinsurers with a minimum credit rating of A- from S&P or equivalent rating from any other international financial and credit rating agencies, according to BloombergQuint.
GIC Re reported a combined ratio of 104 percent for the financial year ended 31 March 2018 after 99.7 percent in the period ending 31 March 2017.