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Local private reinsurer dealt a blow

Dec 07, 2018

The insurance regulator has rejected India-born Canadian billionaire investor Prem Watsa's proposal to acquire India's only local reinsurer, ITI Reinsurance.

The IRDAI's decision was made because of some fundamental issue that would violate the current regulations, reported The Indian Express.

Prem Watsa's GGo Digit Infoworks Services had signed the deal to acquire ITI Re from the Sudhir Valia-owned The Investment Trust of India in June 2018.

Sources say that ITI Re received its reinsurance licence towards the end of 2016 but has never conducted any business. Therefore, the proposed acquisition deal would have involved the trading of a licence, which is not allowed under the regulations.

In addition, ITI Re's licence is valid until 29 December 2018. The IRDAI is unlikely to renew it as the company has not carried out any business.

Currently, the government-run GIC Re is the only Indian reinsurer operating in the country. Under the regulations, GIC Re has the first right of refusal to reinsurance business in the country.

In July last year, there were media reports that ITI Re was considering surrendering its licence as it felt that regulations for the sector hinder the growth and development of new reinsurers. The regulations require primary players to insure with a domestic reinsurance company that has a credit rating, indicating financial stability, for the past three years. However, this is difficult to attain for new companies.

Source: Asia Insurance Review

GIC Re gets top priority in reinsurance business

Dec 07, 2018

GIC Re, the sole Indian public sector reinsurer, will continue to retain the first right of refusal to reinsurance business in India.

The IRDAI in its board meeting on 28 September 2018 decided to continue with the current order of giving first preference to GIC Re. The long pending revised reinsurance regulations, now cleared, aim to ensure that the maximum possible reinsurance business is retained within the country.

According to a Bloomberg Quint report, the revised regulations would take effect from March 2019 when reinsurance contracts come up for renewal for the following 12 months.

The order of preference is as follows:
1. India’s largest reinsurer GIC Re;
2. Other Indian reinsurers that have been doing business for at least three consecutive years;
3. In case both GIC Re and Indian reinsurers refuse the business, preference will be given to foreign reinsurance branches in the country Currently, GIC Re is the sole domestic reinsurer and nine foreign peers have opened local offices.
4. If at least four foreign reinsurance branches refuse to underwrite the risk, the business will go to insurance offices in the International Financial Services Centre, GIFT City—the tax-free hub set up in Prime Minister Narendra Modi’s home state Gujarat.
5. 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.

Revised regulations based on Reinsurance Expert Committee (REC) report

The revised regulations are based on the recommendations of the REC which submitted its report in November 2017. The REC, constituted by the IRDAI and headed by IRDAI former member (non-life) Mr M Ramaprasad, was set up in May 2017 to recommend steps to revamp existing reinsurance regulations and streamline reinsurance operations.

The IRDAI's order of preference has encountered objections from Insurance Brokers’ Association of India; Global Reinsurance Forum that represents over 67% of the world’s reinsurance capacity; and Global Federation of Insurance Associations representing insurance industry of 60 countries that account for around 87% of total insurance premiums worldwide. They had called the suggestions anti-competitive since they allowed GIC Re to maintain its monopoly.

Source: Asia Insurance Review

Govt looks at allowing 100% foreign owned insurance brokers

Dec 06, 2018

The Indian government is mulling allowing 100% foreign direct investment (FDI) in insurance broking to give a boost to the sector, sources say.

Representations have been made to the government time and again for insurance broking firms to be treated at par with other financial services intermediaries, where 100% foreign investments are permitted, reports Press Trust of India.

Currently, the FDI policy imposes a ceiling of 49% on foreign holdings of stakes in insurance brokers, insurance companies, third party administrators, surveyors and loss assessors, as defined by the Department of Industrial Policy and Promotion (DIPP).

The DIPP is an arm of the Commerce and Industry Ministry which deals with FDI related matters and promotes ease of doing business in the country.

"Insurance broking is like any other financial or commodity broking services. The issue was recently discussed in a high level inter-ministerial meeting. The government is positively looking at the matter," sources said.

Source: Asia Insurance Review

Draft rules propose lower capital for insurance marketing firms

Dec 06, 2018

The insurance regulator has proposed to relax rules for the registration of insurance marketing firms (IMFs) with an aim to improving insurance penetration in the country.

In June, the IRDAI had formed a committee to review regulations for IMFs which are registered by the regulator.

Based on recommendations made by the panel, the IRDAI has proposed several changes in the existing framework governing IMFs, reported Press Trust of India.

Among the changes, the IRDAI is considering reducing the net worth requirement to INR500,000 ($7,000) for those applying for an IMF licence. The current minimum capital requirement for registration as an IMF is INR1m.

IRDAI has also proposed expanding the basket of products which can be marketed by an IMF to include group insurance products for micro small and medium enterprises (MSMEs), crop insurance for non-loanee farmers and combi products.

IMFs were introduced by the IRDAI in 2015 to improve insurance penetration in the country through an area-specific approach. A total of 117 districts in 28 states are designated for IMFs to operate in.

IRDAI is seeking feedback from stakeholders on the proposed changes with submissions to be made by 15 December.

Source: Asia Insurance Review

Regulator could liberalise mandatory auto insurance pricing in 2020

Dec 05, 2018

The insurance regulator has indicated that it would stop setting tariffs for compulsory motor third party liability (MPTL) insurance with effect from the fiscal year starting 1 April 2020.

MPTL is the only business line for which the IRDAI currently sets tariffs. IRDAI's decision would pave the way for insurance companies to set all their own pricing, reported Times of India. The rates could fall because of stiff competition.

Officials told the Times of India that stopping the fixing of MTPL tariffs came up for discussion last week when the Prime Minister’s Office held a meeting to discuss the demands of truckers who called on the government to roll back a steep increase of nearly 28% in their premium in the current fiscal year. Mr Piyush Goyal, who acted as finance minister from 14 May to 22 August, had assured truckers’ organisations that the premium hike would be lowered to 15%, but action is still pending on this.

Source: Asia Insurance Review

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