IRDAI vide notification bearing number IRDAI/Reg/5/193/2023 dated August 22, 2023 in exercise of its power conferred by the Insurance Act,1938 and Insurance Regulatory and Development Authority Act, 1999 in consultation of Insurance Advisory Committee has amended the Reinsurance Regulations.
IRDAI has amended three regulations namely:
a. Insurance Regulatory and Development Authority of India (Re-insurance) Regulations, 2018.
b.Insurance Regulatory and Development Authority of India (Registration and Operations of Branch Offices of Foreign Re-insurers other than Lloyd’s) Regulations, 2015.
c. Insurance Regulatory and Development Authority of India (Lloyd’s India) Regulations, 2016.
Key highlights of the amended regulations are as follows:
1. Short Title and commencement:
The regulation shall be called Insurance Regulatory and Development Authority of India (Re-insurance) (Amendment) Regulations, 2023.
2. Objective:
The objective of these amendments is to harmonize the provisions of various regulations applicable to Indian Insurers and Indian Re-insurers including Foreign Re-insurance Branches (FRBs) and IFSC Insurance Offices (IIOs), encourage more reinsurers to set up business in India and to enhance ease of doing business.
AMENDMENT TO THE INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA (RE-INSURANCE) REGULATIONS, 2018
Regulation No.
Original Regulation (2018)
Amended Regulation (2023)
Regulation 1, sub-regulation (3)
These Regulations shall be applicable to Insurers as defined under Sec.2 (9) of the Act, International Financial Services Centre (IFSC) Insurance Office (IIO) and Exempted Insurers as defined under Sec.118(c) of the Act.
These Regulations shall be applicable to Insurers as defined under Section2 (9) of the Act, and exempted insurers as envisaged under Section118(c) of the Act.
Regulation 1, after sub-regulation (3) regulation (4) is added.
following sub regulation shall be inserted as it was not mentioned in original regulation (2018)
(4) These Regulations shall be reviewed once every three years from the date of notification of the Insurance Regulatory and Development Authority of India (Re-insurance) (Amendment) Regulations, 2023 unless a review, repeal or amendment is warranted earlier.
Regulation 2, clause 4, sub-clause (A)
A. The Board of Directors of (a) the Indian Insurers other than IIOs writing direct insurance business, (b) Indian Re-insurers and (c) Service Companies of Lloyd’s India.
A. The Board of Directors of (a) the Indian Insurers other than FRBs writing direct insurance business, (b) Indian Re-insurers and (c) Service Companies of Lloyd’s India.
Regulation 2, clause 4, sub-clause (B)
B. The Executive Committee, of Foreign Reinsurers’ Branches (FRBs) and International Financial Service Centre Insurance Offices (IIOs) , duly authorized by the Board of Directors of their applicant companies.
B. The Executive Committee, of Foreign Reinsurers’ Branches (FRBs), duly authorized by the Board of Directors of their applicant companies.
Regulation 2, clause (14)
‘Indian Insurer’, for the purpose of these regulations, means an ‘insurer’ as defined under section 2(9) of the Act, which has been granted certificate of registration by the Authority, and shall also include Exempted Insurers and IIOs.
‘Indian Insurer’, for the purpose of these regulations, means an ‘insurer’ as defined under section 2(9) of the Act, which has been granted certificate of registration by the Authority, and shall also include Exempted Insurers.
Regulation 2, clause (17)
International Financial Service Centre (IFSC) Insurance Office’, hereinafter called by acronym ‘IIO’, means a branch office, of an insurer or a Re-insurer domiciled in India or outside, which has been granted a certificate of registration by the Authority to set up its office in IFSC-SEZ, to transact insurance business or re-insurance business or both.
International Financial Services Centres Authority, also referred to by the acronym IFSCA, means the International Financial Services Centres Authority established under sub-section (1) of Section 4 of the International Financial Services Centres Authority Act, 2019.
Regulation 2, clause (17) (A)
Sub Clause (A) is added
‘ International Financial Services Centre (IFSC) Insurance Office’, hereinafter called by acronym ‘IIO’, shall have the same meaning as assigned to it under IFSCA (Registration of Insurance Business) Regulations, 2021.
Regulation 2, clause (21)
‘Retrocession’ means a re-insurance transaction whereby a part of assumed reinsured risk is further ceded to another Indian Insurer or a CBR.
‘Retrocession’ means a re-insurance transaction whereby a part of assumed reinsured risk is further ceded to another Indian Insurer or an IIO or a CBR.
Regulation 2, after clause (22), which shall be clause (23) and the old clause (23) shall be re-numbered to clause (24).
‘Domestic Tariff Area’ also denoted by the acronym ‘DTA’ shall have the same meaning assigned to it under sub-section (i) of section 2 of the Special Economic Zones Act, 2005.
Regulation 3, clause (C) of sub-regulation (2)
Every Indian Re-insurer shall maintain a minimum retention of 50% of its Indian business.
Every Indian Re-insurer including Foreign Re-insurance Branches (FRBs) shall maintain a minimum
retention within India of 50% of Indian re-insurance business underwritten. Any retrocession to an IIO up to 20% of Indian re-insurance business underwritten shall be reckoned towards the required minimum retention of 50%.
Regulation 3, sub clause (b) of clause (A) of sub-regulation (3)
submit to the Authority, its Board approved Re-insurance Programme along with its retention policy for the forthcoming financial year, 45 days before the commencement of the financial year.
submit to the Authority, its proposed Re-insurance programme, for the forthcoming financial year in the specified summary format , at least 45 days before the commencement of the financial year.
Regulation 3, in sub clause (c) of clause (A) of sub-regulation 3
file with the Authority, within 30 days of the commencement of the financial year.
within 45 days of the commencement of the
financial year.
Regulation 3, serial no. (i) of sub clause (c) of clause (A) of sub-regulation (3)
its Board approved Final Re-insurance Programme incorporating the changes, if any, in the programme submitted under 3(3)(A)(b) above or a declaration by the CEO that the entity has not made any change in the filed Programme.
its Board approved Final Re-insurance Programme specifically highlighting improvements in net retention per insurance segment together with the variation, if any, from the Re-insurance Programme of the preceding year as well as from the proposed Re-insurance Programme submitted under sub clause (b) of clause (A) of sub Regulation (3) of Regulation 3 .
Regulation 3, after sub clause (d) of clause (A) of sub-regulation (3)
Clause (e) shall be added and was not included in original regulation.
e. submit to the Authority, within 90 days of the commencement of financial year, a certification from the CEO confirming that all Treaties associated with the Re-insurance Programme for the financial year have been received in original, duly stamped and signed (or digitally signed), from all parties to the treaty.
Regulation 3, clause (D) of sub-regulation (3)
In addition to the requirements as at regulation 3(3)(C) above, every Indian Reinsurer, FRB and IIO writing reinsurance business, shall file the Board approved underwriting policy. Any subsequent change, in the underwriting policy, shall be duly approved by the Board and filed with the Authority within 15 days of Board’s approval.
In addition to the requirements as per regulation 3(3)(C) above, every Indian Reinsurer and FRB writing re-insurance business, shall file the Board approved underwriting policy. Any subsequent change, in the underwriting policy, shall be duly approved by the Board and filed with the Authority within 15 days of Board’s approval.
Regulation 3, after clause (D) of sub-regulation (3)
Clause (E) shall be added and was not included in original regulation.
Every Indian insurer shall submit soft copies of list of Re-insurers with their credit rating, their shares in the proportional and non-proportional Re-insurance arrangements along with final Re-insurance programme.
Regulation 3, sub-regulation (5)
Every Indian insurer shall submit soft copies of each and every re-insurance contract, list of Re-insurers with their credit rating, their shares in the proportional and non-proportional Re-insurance arrangement. The hard copies of the above documents shall be maintained for the period specified in the relevant extant regulations and shall be made available to the Authority for inspection.
The record of list of Re-insurers with their credit rating, their shares in the proportional and non-proportional Reinsurance arrangements, each and every re-insurance contract shall be maintained by every Indian insurer for the period specified in the relevant extant regulations and shall be made available to the Authority for inspection.
In Regulation 4, under sub-regulation (2)
Reinsurance placements with a CBR, not fulfilling the above stated eligibility criteria shall require prior approval of the Authority.
Reinsurance placements with any International Pool or Risk sharing arrangement having CBRs as members, participants or administrators shall also require prior approval of the Authority
Regulation 4, after sub-regulation (3)
Sub-Clause (4) shall be added and was not included in original regulation.
To maximize retention in India and to increase domestic capacity, the Authority may undertake review of the business underwritten, claims experience and lines of support given by a CBR, and based on the review, the Authority may stipulate such conditions as may be considered necessary to achieve the stated objectives.”
Regulation 5, sub-regulation (1)
1. Obtaining best terms for Cessions:
Every cedant, shall be free to obtain best terms for its Re-insurance protection of domestic risks, subject to the
following:
A. Cedants shall seek terms at least from all Indian Re-insurers, who have been transacting Re-insurance business (other than emanating from obligatory cession) during the immediate past three continuous years and at least from four FRBs.
B. No cedant shall seek terms from:
a. IIOs having credit rating below A- from Standard & Poor’s or equivalent rating from any other International Rating Agency, or
b. CBRs having credit rating below A- from Standard & Poor’s or equivalent rating from any other International Rating Agency.
C. No cedant shall seek terms from any Indian Insurer, not registered with the Authority to transact reinsurance business.
D. The cedant shall be responsible and accountable to comply with these regulations, irrespective of whether the terms are obtained directly or through Re-insurance Broker.
1. Seeking lead re-insurance support:
Every Cedant shall abide by the following provisions whilst seeking best re-insurance terms:
A. Every Cedant shall firstly seek lead terms (other than emanating from obligatory cession) from all Indian Re-insurers which have been without interruption transacting re-insurance business during immediate previous complete three financial years and at least 4 other “Category 2” (as per clause (b) of sub-regulation (2)(A) of Regulation 5) reinsurers.
B. No Cedant shall seek lead terms from CBRs/IIOs having credit rating below ‘A-‘from Standard & Poor’s or an equivalent credit rating from any other International Rating Agency. Provided that such requirement of minimum credit rating shall not be applicable if an IIO is a subsidiary/ branch of an Indian insurer.
C. Except for facultative re-insurance protection, no cedant shall seek terms from any Indian Insurer,
which is not registered with the Authority exclusively to transact re-insurance business or from an IIO which is not permitted to undertake re-insurance business by IFSCA.
D. The cedant shall be responsible and accountable to comply with these regulations, irrespective of
whether the terms are obtained directly or through any Re-insurance Broker.
Explanation: A cedant may not seek terms from a Reinsurer or an IIO which is a group/associate company of other Indian Insurer.
Regulation 5, Clause (A) sub-regulation (2)
A. Every cedant shall offer best terms obtained, for participation in the following order of preference:
a. to Indian Re-insurers, transacting re-insurance business (other than emanating from obligatory cession) during the immediate past three continuous financial years;
b. to other Indian Re-insurers and FRBs;
c. to the IIO as under regulation 5(1)(B)(a) which provided the best and lead terms with capacity of not less than 10%;
d. to the CBR as under regulation 5(1)(B)(b) which provided the best and lead terms with capacity of not less than 10%;
e. to other IIOs;
f. to other Indian Insurers (only Facultative) and CBRs.
Every cedant shall secure maximum participation by ‘Category 1’ and ‘Category 2’ reinsurers in order to maximise retention within Indian market while fulfilling the minimum necessary placement with the lead reinsurers quoting the best terms (other than emanating from obligatory cession). Every cedant shall abide by the following Order of Preference whilst seeking placement:
a) Category 1: Indian Reinsurers
b) Category 2: IIOs (which invest 100 % of retained premiums, emanating from insurers in India, in the DTA) and FRBs.
c) Category 3: Other IIOs;
d) Category 4: Other Indian Insurers (only in respect of per-risk facultative placements in the insurance
segment for which the Insurer is registered to transact business) and CBRs.
Explanation 1: Except for facultative re-insurance protection, no cedant shall seek participation from any Indian Insurer, which is not registered with the Authority exclusively to transact re-insurance business and an IIO, which is not permitted to undertake re-insurance business by IFSCA. Further such Indian Insurer and IIO shall not be offered to lead on any reinsurance protection.
Explanation 2: A cedant may opt not to offer participation to FRB or an IIO who declined to quote or did not quote the terms.
Explanation 3: A cedant may not offer for participation to an Indian Reinsurer, FRB or an IIO which is a group/associate company of other Indian Insurer.
Regulation 6, after sub-regulation (2) a proviso shall be inserted.
Provided that the cession limits as above shall not be applicable to cedants which place total reinsurance premiums outside India up to rupees seventy-five crore during a financial year and the placements are with CBRs having a rating of BBB+ and above
Regulation 12, after clause C in sub-regulation (2) the following clauses shall be inserted
D. exposure limits of a CBR, with all cedants taken together;
E. framework for domestic and international Insurance Pools
After Regulation 12, a new regulation 13 shall be inserted namely
13. Transition Provision All reinsurance placements under any arrangements/ treaties for financial year 2023-24 entered into by insurers prior to the date of notification of the Insurance Regulatory and Development Authority of India (Re-insurance) (Amendment) Regulations, 2023 shall continue for the remaining period of the year as per the terms therein. Insurers shall ensure that any new treaties/ arrangements entered into on or after the date of notification of Insurance Regulatory and Development Authority of India (Re-insurance) (Amendment) Regulations, 2023 shall be compliant with provisions of these regulations.
AMENDMENT TO THE INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA (REGISTRATION AND OPERATIONS OF BRANCH OFFICES OF FOREIGN REINSURERS OTHER THAN LLOYD’S) REGULATIONS.
Regulation No.
Original Regulation (2016)
Amended Regulation (2023)
Regulation 8, the following explanation is inserted
The explanation is inserted after the amendment
Explanation: Any retrocession to an IIO up to 20% of Indian re insurance business underwritten shall be reckoned towards the required minimum retention of 50%.
Regulation 37, clause (a) of sub-regulation (2)
five lakhs rupees
Ten lakh rupees
sub-regulation (4) of Regulation 50
Outsourcing: The service company of Lloyd’s India shall retain the core activities such as underwriting, claims settlement and regulatory compliances; and may outsource functions such as back-office servicing, investment , IT, accounts, marketing, human resources, administration and publicity. No other function can be outsourced without the prior approval of the Authority.
Outsourcing: The service company of Lloyd’s India shall retain the core activities such as underwriting, claims settlement and regulatory compliances; and may outsource functions such as back-office servicing, IT, accounts, marketing, human resources, administration and publicity. No other function can be outsourced without the prior approval of the Authority.
AMENDMENT TO THE INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA (LLOYD’S INDIA) REGULATIONS, 2016.
Regulation No.
Original Regulation (2016)
Amended Regulation (2023)
Regulation 8, the following explanation is inserted
The explanation is inserted after the amendment
Explanation: Any retrocession to an IIO up to 20% of Indian re insurance business underwritten shall be reckoned towards the required minimum retention of 50%.
Regulation 37, clause (a) of sub-regulation (2)
five lakhs rupees
Ten lakh rupees
sub-regulation (4) of Regulation 50
Outsourcing: The service company of Lloyd’s India shall retain the core activities such as underwriting, claims settlement and regulatory compliances; and may outsource functions such as back-office servicing, investment , IT, accounts, marketing, human resources, administration and publicity. No other function can be outsourced without the prior approval of the Authority.
Outsourcing: The service company of Lloyd’s India shall retain the core activities such as underwriting, claims settlement and regulatory compliances; and may outsource functions such as back-office servicing, IT, accounts, marketing, human resources, administration and publicity. No other function can be outsourced without the prior approval of the Authority.
Source category: IRDAI
Attachments
- /2023/246_IRDAI_Reinsurance_Amendment_Regulation_2023.pdf
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