IRDAI vide ref. no IRDAI/REIN/MSTCIR/MISC/87/5/2024 dated May 31, 2024 issued Master Circular on Reinsurance, 2024 (“Master Circular”) to specify various requirements and forms and to provide directions/guidelines on various provisions of the IRDAI (Registration and Operations of Foreign Reinsurers Branches and Lloyd’s India) Regulations, 2024 and IRDAI (Reinsurance) Regulations, 2018 (“Regulations”).
The Master Circular is applicable to all Insurers, Reinsurers, Foreign Reinsurers Branches and Lloyd’s India and shall come into force from the date of its issuance i.e. May 31, 2024.
The following prescriptions stand repealed from the date of issue of the Master Circular:
1. Submission of Advance Reinsurance Programme – IRDA/REIN/CIR/RISF/4/1/2024 dated January 05, 2024
2. Guidelines on issuance of File Reference Numbers (FRN) to Cross Border Re-insurers – IRDAI/REIN/GDL/MISC/2/1/2023 dated January 03, 2023
3. Reinsurance Treaty Agreements covering Fire and Engineering Lines of Business – prohibition of provisions that make for broad market price tariffs – IRDAI/REIN/CIR/MISC/247/12/2022 dated December 19, 2022
4. Repatriation of Assigned Capital by FRBs/Lloyd’s India – IRDAI/REIN/CIR/MISC/224/10/2022 dated October 26, 2022
5. Public Disclosures by FRBs/Lloyd’s India – IRDAI/REIN/CIR/MISC/112/6/2022 dated June 03, 2022
6. Restriction on Holding more than one certificate of Registration by one group – IRDAI/F&A/CIR/MISC/26/2/2022 dated February 16, 2022
7. Corporate governance guidelines IRDA/F&A/GDL/CG/100/05/2016 dated May 18, 2016
Key highlights of the Master Circular:
1. Part I of the Master Circular prescribes formats and provisions pertaining to IRDAI (Registration and Operations of Foreign Reinsurers Branches and Lloyd’s India) Regulations, 2024 which has been divided under the following chapters:
i. Chapter I: Registration of Foreign Reinsurers Branches, Lloyd’s India, Service Companies and Syndicates of Lloyd’s India
ii. Chapter II: Operations of Foreign Reinsurers’ Branch Office
iii. Chapter III: Miscellaneous
a. Transitory provisions : This Master Circular would be applicable to all arrangements and contracts effected from the date of implementation. However, for all existing arrangements the FRBs shall ensure compliance within 180 days from the date of this circular.
b. Reports to be furnished by insurers: The formats of returns to be furnished by insurers shall be specified through a separate Master Circular on Submission of Returns. All the provisions of the circulars viz. ref. IRDA/REIN/CIR/RT/1/1/2023 dated 3rd January, 2023 and ref. IRDA/RI/CIR/MISC/011/01/2019 dated 15th January 2019 shall continue to be applicable till the Master Circular on Submission of Returns is issued.
2. Part II of the Master Circular prescribes formats and provisions pertaining to IRDAI (Re-insurance) Regulations, 2018 which has been divided under the following chapters:
Chapter I: Directions for issue of File Reference Numbers (FRN) to Cross Border Reinsurers (CBR)
a. These directions aim to streamline the regulatory approval process with respect to cross border reinsurers (CBRs).
b. All insurers shall ensure that CBRs meet, inter-alia, rating requirements as per IRDAI (Reinsurance) Regulations, 2018 and shall have a valid File Reference Number (FRN), before placing any business with them.
c. FRNs are issued for each financial year by the Authority
d. Formats of application for issue of FRN and Compliance Certificate prescribed
i. The content of ‘Declaration cum Undertaking’ to be given by the CCO of the ceding insurer with the application for issue of FRN has been modified to include an undertaking to inform the Authority immediately in case the rating of the CBR is downgraded or any regulatory actions, penalties, or disciplinary proceedings are initiated against CBR /its parent in home Country/Jurisdiction
Chapter II: Reinsurance Programme
a. The Authority has specified the guidelines for submission of information in advance Reinsurance Programme ( Annexure A ), formats for submission of summary advance Reinsurance Programme ( Annexure B ) and the Compliance certificate ( Annexure D ) thereto to be submitted at least 45 days before the commencement of the financial year
b. As per the Regulation 3 (3)(A)(c) of the IRDAI (Re-Insurance) Regulations, 2018, the Board approved Final Re-insurance Programme shall be submitted by all insurers within 45 days of the commencement of every financial year. Insurers shall submit the information in the format Annexure B along with the final reinsurance programme.
Chapter III: Collateral requirements for placement of reinsurance business with Cross Border Reinsurers (CBRs)
a. The Cross Border Reinsurers (CBRs) accepting business from Indian cedant shall be required to provide collaterals either in the form of irrevocable Letter of Credit (LC) or premiums/funds withheld by the ceding insurer:
i. In case of LC:
It shall be issued through an IFSC Banking Unit or a RBI regulated scheduled commercial bank,
- May be accepted either in Indian Rupees or in any freely convertible foreign currency,
- Amount of LC shall be equivalent to aggregate of outstanding claims liabilities and IBNR reserves of ceding Company for re-insurance contract with CBR
- The amount of collateral shall be as below:
Rating Position of CBR
Minimum Amount of collateral (aggregate of outstanding claims liabilities and IBNR reserves)
A- or above from Standard or Poor’s or equivalent
75%
Below A-
100%
a. In case of Premium/ Funds withheld:
- The premiums/ funds withheld from each CBR shall be identified, accounted for, kept and invested separately from the funds of the insurer.
- The investment income, if any, on such withheld funds shall be credited to such fund(s),
- The minimum amount of premium/ fund withheld shall be 50% of the premiums ceded by the insurer to a CBR.
b. The cedant shall release collaterals if all liabilities of a CBR under re-insurance contract are fully extinguished.
c. Ceding insurers shall not be permitted to take credit of collaterals for the purpose of determining the available solvency margin.
d. Ceding insurers shall confirm compliance with collateral requirements based on the approved reinsurance program.
e. The following reinsurance transactions shall not be subject to collateral requirements:
- premium retroceded by the branches of foreign reinsurers and Indian reinsurers to CBRs
- premiums ceded to CBRs in respect of schemes of the government, such as PMFBY, PMJAY, PMJJBY, PMSBY
- if total premium ceded by an insurer to CBRs is up to rupees 75 crore during a financial year, provided that the CBRs are rated ‘A-’ or above from S&P or equivalent.
f. These provisions shall be applicable for all the reinsurance placements with CBRs by cedants from India, for reinsurance programs for FY 2025- 26 onwards.
The copy of the Master Circular is attached herewith for your ready reference.
Source category: IRDAI
Attachments
- /2024/399_Master_Circular_on_Reinsurance,_2024.pdf
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