Insurance companies are most likely to enter into reinsurance treaties for the fiscal 18-19 based on the existing guidelines, as the draft policy on reinsurance released by IRDAI will take some time.
IRDAI had constituted an expert committee on reinsurance in May 2017, based on which it had proposed the draft regulations and had invited comments and suggestions on the draft.
Insurance companies usually commence their annual reinsurance programme in the beginning of every financial year (starting April 1). The insurers are also required to submit their Board-approved Reinsurance Programme along with retention policy for each forthcoming fiscal to IRDA atleast 45 days before the commencement of the financial year.
According to Sasi Kumar Adidamu, Chief Technical Officer, Bajaj Allianz General Insurance, the reinsurance guidelines, which are currently in the draft form will review the stakeholders’ feedbacks and suggestions and follow a certain process before getting fructified into final regulations.
“In India reinsurance treaties (for a given year) are renewed with effect from April 1. In case, the proposed reinsurance draft guidelines are not effective in time, the industry will have to follow the existing reinsurance regulations, which are enforced currently,” Adidamu said.
The draft guidelines have prescribed a specific order of preference for placement of reinsurance business in India, wherein GIC Re is likely to retain first preference followed by foreign reinsurance branches (FRB) in India and lastly the cross-border insurers. They also suggest that the risk can be placed with the Indian reinsurer and FRB without cession limits.
According to Insurance Brokers Association of India, prescribing a specific order of preference for placement of reinsurance business in India would lead to extreme form of anti-competition.
“Individual and corporate policyholders’ cost, coverage, service will get severely compromised and innovation in wordings, products severely constrained,” the association observed.