The Reinsurance Advisory Board (RAB) has responded to a consultation by the Insurance Regulatory and Development Authority of India (IRDAI) on its draft amendments to its reinsurance regulations.
The IRDAI’s proposed changes on order of preference would deliver positive developments towards a more open and balanced reinsurance market, which the RAB welcomes.
The RAB also welcomes the IRDAI’s proposal to bring foreign reinsurance branches (FRBs), Lloyd’s India and International Financial Services Centre Insurance Offices (IIOs) on a par with the state reinsurance company. However, such changes should be made in conjunction with other amendments to existing laws and regulations to create a proper level playing field for FRBs. In particular, FRBs should be considered as being resident under the Income Tax Act.
In addition, requirements for the maintenance of assigned capital or repatriation of capital/surplus applicable to FRBs should be removed or eased. Restrictions on the outsourcing of functions severely affect the ability of FRBs to benefit from processes from other entities in their group or from best-in-class global service providers.
Furthermore, the RAB opposes the proposed requirement for cross-border reinsurers (CBRs) to retain 50% of premium with their cedants by way of collateral. Similarly, the RAB recommends removing the 50% retention of reinsurance premium by locally domiciled branches of foreign reinsurers.
While the RAB supports the increase in the maximum cession limit for CBRs, the RAB urges the IRDAI to reconsider its current regime of restrictive practices and to pursue a regime under which all cession limits are lifted.
The secretariat of the RAB is provided by Insurance Europe.