General Insurance Insurance Corporation (GIC), the country?s official reinsurer will see its obligatory cession reduced to 10% from the existing 15% from April 2008.
Obligatory cession is the portion of business, which the domestic general insurers have to mandatorily reinsure with GIC Re.
Post-liberalisation when GIC Re was made into an exclusive reinsurer, the Insurance Regulatory & Development Authority (Irda) had pegged the obligatory cession at 20 %. This was brought down to 15% from April 2007.
Meanwhile, the reinsurer has had a bumper year with a net profit of Rs 1,531 crore in 2006-07. Higher interest rates and a buoyant stock marker has seen the reinsurer gain a large investment income of Rs 1,793 crore during 2006-07.
Irda chairman CS Rao had recently visited the GIC Re headquater in the city to address its employees about the future challenges for the reinsurer.
The reinsurer which is a major player in Afro-Asian region is gradually gearing up to meet challenges out of the lower obligatory cession in future.It is working to ensure a balance in its domestic as well as international portfolio.
Currently domestic revenues account for over 70% of the company?s gross premium income. The company has diversified its area of operations by accepting new lines of business such life reinsurance, off-shore-energy and liability business.GIC Re has enhanced its risk management and assessment capabilities to provide value added services to the clients. The company is also working on a roadmap for future business expansion , strategic investments and joint ventures.
The company is also preparing to meet the international benchmark s in response time, service standard and technological inputs.
It had embarked upon an organisational and technological revamp to be on par with other major global reinsurers. Analysts point out that the domestic reinsurance scenario is expected to change very soon as the centre is considering the proposal to allow the global major reinsurers like Swiss Re, Munich Re to open branch offices in the country. These reinsurers, though willing to enter Indian market as local reinsurer, have not been able to do so as they are unwilling to follow the existing requirement of forming a joint venture with a local company.