Insurance regulator Irdai has approved a series of amendments to the reinsurance regulations, including lowering minimum capital requirement for foreign re-insurance branches (FRBs), streamlining order of preference for international financial services centre insurance offices and simplifying the format for reinsurance programmes.
The Insurance Regulatory and Development Authority of India (Irdai) said these amendments were aimed at promoting a favorable business environment and attracting more reinsurers to establish operations in the country.
“The minimum capital requirement for FRBs has been lowered from Rs 100 crore to Rs 50 crore, with the provision to repatriate any excess assigned capital. The order of preference, previously spanning six levels, has been streamlined to four levels,” the regulator said on Thursday, adding the format for reinsurance programs has been simplified, and regulatory reporting requirements have been rationalized for increased clarity and effectiveness.
Irdai approved these amendments to the reinsurance regulations during its 123rd authority meeting. It said the overarching objective of these amendments was to harmonize and streamline the existing regulations that apply to Indian insurers, Indian reinsurers, FRBs, and International Financial Services Centre Insurance Offices (IIOs). “This comprehensive regulatory overhaul is strategically designed to position India as a prominent global reinsurance hub,” it pointed out.
According to the insurance regulator, the key focus areas of these amendments revolve around several crucial aspects. Firstly, there is a concerted effort to increase the overall capacity of the reinsurance sector, which can help accommodate growing demand and manage larger risks. Additionally, these amendments seek to enhance technical expertise within the industry, fostering an environment of excellence and innovation. Another vital aspect is the reduction of the compliance burden on various entities operating in the sector, allowing them to navigate the regulatory landscape more efficiently.
The General Insurance Corporation of lndia (GIC Re) is the largest reinsurer in the domestic reinsurance market in the country. Besides Lloyd’s India and its service companies, there are 10 foreign reinsurers branch (FRB) in India.
Irdai said a critical aspect of the new amendments was their alignment with the broader goal of positioning India as a global reinsurance hub. “By working in tandem with the International Financial Services Centres Authority (IFSCA), Irdai aims to cultivate an environment conducive to the growth of reinsurance activities, both within and outside the conventional Indian market. The regulatory framework for IIOs has been aligned with IFSCA regulations with the intent to remove dual compliance, thereby promoting a seamless integration of these entities into the larger financial ecosystem,” it said, adding the revised order of preference for IIOs, coupled with simplified regulations and improved placement alongside FRBs, will foster a more competitive environment.
According to insurance industry observers, the tweaking of order of preference of placing insurance outside India will actually improve the reinsurance ecosystem in the country. Right now there are a few reinsurance players who have set up offices in the country. Thus, following the revised order of preference for IIOs, India may see more traction for foreign reinsurance players and reinsurance potential may go up.
“The only thing is that it may not be completely in the interests of GIC Re. The new amendments to the reinsurance regulations could adversely impact its market share. That is the only flip side of it,” an industry analyst told FE.
Analysts observed that lowering the minimum capital requirement for FRBs from Rs 100 crore to Rs 50 crore is not a “huge sweetener” for large foreign reinsures. “Reinsurance startups and boutique reinsurers may only get attracted to the revised norms on lower capital requirement,” they added.