GIC Re Retains First Right To Reinsurance Business In India
The insurance regulator allowed state-run General Insurance Corporation to retain the first right to offer reinsurance in the country, two people present at its board meeting told BloombergQuint requesting anonymity.
The new regulations—finalised at the Sept. 28 meeting—apply to all segments of the insurance sector and will govern the terms for reinsurance business in India. They come into effect from March 2019, according to one of the officials quoted earlier, when reinsurance contracts are renewed for the next year.
The Insurance Regulatory and Development Authority of India adopted the order of preference recommended by its expert committee on Jan. 5. That came despite objections from Insurance Brokers’ Association of India, Global Reinsurance Forum that represents over 67 percent of the world’s reinsurance capacity, and Global Federation of Insurance Associations representing insurance industry of 60 countries that account for around 87 percent of total insurance premiums worldwide. They had called the suggestions anti-competitive since they allowed GIC Re to maintain its monopoly.
After India’s largest reinsurer GIC, the second preference will be given to other Indian reinsurers that have been doing business for at least three consecutive years, the people said citing the guidelines. The third preference, in case both GIC Re and Indian reinsurers refuse, will be given to foreign reinsurance branches in the country. As of now, GIC Re is the sole domestic reinsurer and its nine foreign peers have local offices.
The fourth preference, if at least four foreign reinsurance branches refuse to underwrite risk, will go to insurance offices in International Financial Services Centre, GIFT City—the tax-free hub set up in Prime Minister Narendra Modi’s home state Gujarat. In case they refuse too, the insurer can then obtain best terms for reinsurance from cross-border reinsurers with a minimum credit rating of A- from S&P or equivalent rating from any other international financial and credit rating agencies.