Exposure Draft of IRDAI (Re-insurance) (First Amendment) Regulations_ 2022

The IRDAI has issued an exposure draft on the IRDAI (Re-insurance) (First Amendment) Regulations, 2022” (Draft Amendment)

Objective:

In order to harmonize the provisions and enhance the ease of doing business, the IRDAI has amended following Regulations applicable to Insurance Companies and Reinsurers including Foreign Reinsurance Branches (FRBs) and Lloyd’s:

a. IRDAI (Re-insurance) Regulations, 2018

b. IRDAI (Registration and Operations of Branch Offices of Foreign Re-insurers other than Lloyd’s) Regulations, 2015

c. IRDAI (Lloyd’s India) Regulations, 2016

Following are the major proposed amendments:

• The retrocession to IIOs ( upto 20% ) to be counted towards the retention requirements of FRBs ( minimum 50% of Indian reinsurance business )
• Reduce compliance requirements on submission of Advance Reinsurance programme i.e. simplified format to be specified by the Authority
• Revise order of preference while placing the Reinsurance business

Existing Order of Preference

Revised Order of Preference

Every cedant shall offer best terms obtained, for participation in the following order of preference:

Every cedant shall offer best terms obtained, for participation in the following order of preference:

• to Indian Re-insurers, transacting re-insurance business (other than emanating from obligatory cession) during the immediate past three continuous financial years;
• Category 1: Indian Reinsurers, FRBs, Lloyd’s India, IIOs
• to other Indian Re-insurers and FRBs;
• Category 2: CBRs who:
• Agree to retain minimum 50% premium by way of premium deposit with the cedant. It will be the responsibility of the Insurers to maintain this premium in a separate designated/escrow account as well as to invest such amount into Government of India Securities; or
• Agree to provide collaterals/ letter of credit/ bank guarantee for 50% premium to the cedant; or
• Agree to maintain a dollar denominated account in IFSC Banking Unit (IBU) in IFSC/ and maintain 50% of premiums in the account.
• to the IIO as under regulation 5(1)(B)(a) which provided the best and lead terms with capacity of not less than 10%;
• Category 3: to other Indian Insurers (Facultative) and Other CBRs

Explanation: Except for facultative reinsurance protection, no cedant shall offer for participation to any Indian Insurer, which is not registered with the Authority exclusively to transact reinsurance business. Further, such Indian reinsurer shall not be offered to lead on any reinsurance protection.

• to the CBR as under regulation 5(1)(B)(b) which provided the best and lead terms with capacity of not less than 10%;
• to other IIOs;
• to other Indian Insurers (only Facultative) and CBRs.

Explanation: Except for facultative reinsurance protection, no cedant shall offer for participation to any Indian Insurer, which is not registered with the Authority exclusively to transact reinsurance business. Further such Indian Insurer shall not be offered to lead on any reinsurance protection.

• Increase the cession limits of the cedants (non-life business) while placing business with Cross Border Reinsurers in the following manner:
• from 20% to 25% for greater than A+ rating CBRs
• from 15 to 17.5% for greater than BBB+ and up to and including A+ rating CBRs.
• Reduce the assigned capital limits requirements in respect of new Foreign Reinsurance Branches (FRBs) from one hundred crore to fifty crore
• Chairman may issue guidelines on issuance of File Reference Number (FRN) to CBR, conditions of renewal of FRN, Alternative Risk Transfer (ART) and Regulatory framework of domestic Insurance Pools

Source category: IRDAI

Attachments

• /2022/100_2022-10-20_Exposure_Draft_of_IRDAI_(Re-insurance)_(First_Amendment)_Regulations.pdf