Ministry sources said both the IRDA and the Government were involved innegotiations to make General Insurance Corporation the National Re. Atpresent, majority of outward and inward reinsurance business is handled byGIC. The draft guidelines mandates a statutory cession of 20 per cent on alldirect business written in India on a `quota share basis' in favour of theNational Re. However, this quota share will be subject to certain overalllimits, prescribed exemptions or reductions in specified class ofbusiness.

The National Re, the guidelines say, will not only provide reinsurancesupport to domestic insurance companies by accepting their surplus but wouldalso facilitate the formation of market pools so that maximum retentionwithin the country is achieved.

The overall parameters for the country's reinsurance programme will include:maximisation of retention within the country; to develop adequatereinsurance capacity for the industry; to secure the best possibleprotection possible for the reinsurance costs incurred; to simplify theadministration of business.

The reinsurance programme of every insurer, the guidelines add, shallcommence from the first day of every financial year, and every insurer willhave to submit to the authority its reinsurance programmes for the year 45days before the inception of the financial year.

The authority shall constitute a dispute resolution committee consisting ofthree members of which one will be a person from the authority, onerepresentative from insurers/reinsurers having knowledge/expertise ofreinsurance and one person from the intermediaries specialising in the areaof reinsurance, the guidelines say.

The committee shall go into all complaints referred to it by any of theparties concerned and after examining all facts to give a decision in atime-bound manner.

Any person not satisfied by the decision of the committee can appeal to thechairperson of the authority who can have a fresh look at the case and givehis decision, which is binding on the party.

If any case of violation of IRDA rules, the reinsurance companies will beliable to a penalty of Rs 50,000 in the first instance and Rs 100,000 eachduring the second and third offence. A further recurrence of such offencewill result in termination of license.