Reinsurance Treaty Agreements covering Fire and Engineering Lines of Business.

IRDAI vide ref No: IRDAI/REIN/CIR/MISC/ 247 /12/2022, dated December 19, 2022 has issued a Circular on “Reinsurance Treaty Agreements covering Fire and Engineering Lines of Business – prohibition of provisions that make for broad market price tariffs” (Circular).

Background

IRDAI vide its Circular dated May 12, 2022 had clarified that the IIB only publishes broad-occupancy market average burning costs (commonly referred to as “IIB rates”) for Fire and Allied perils and these were not to be interpreted/ operated as a minimum mandated rate. However, it has been observed by IRDAI that Reinsurance Treaty Agreements in many instances include a precondition pertaining to applying the IIB rates as minimum risk rates. Reiterating the clarifications provided in its aforementioned Circular, the IRDAI has issued following Directions.

Direction issued by IRDAI as follows:

• Every Reinsurer shall have the freedom to price its reinsurance product and freely negotiate terms of trade with Cedants (Insurers) provided such terms of trade shall not be an impediment on the freedom of the Cedant to freely compete, negotiate, price and assume risks with its clients.

All Non-life insurers and reinsurers to ensure that IIB rates shall not be embedded as minimum rates within Reinsurance Treaty Agreements applying to the Indian Market for the risks commencing on and after April 1, 2023.

Source category: IRDAI

Attachments

• /2022/137_REINSU~1.PDF