IRDA (General Insurance – Reinsurance) Regulations, 2013
Notification F. No. IRDA/Reg./5/63/2013, dated 7-2-2013
In exercise of the powers conferred by section 114A of the Insurance Act, 1938, sections 14 and 26 of the Insurance Regulatory and Development Authority Act, 1999, the Authority, in consultation with the Insurance Advisory Committee, hereby makes the following regulations, namely:
Short title and commencement
1. (1) These regulations may be called the Insurance Regulatory and Development Authority (General Insurance – Reinsurance) Regulations, 2013.
(2) These Regulations replace the Insurance Regulatory and Development Authority (General Insurance – Reinsurance) Regulations, 2000.
(3) These regulations shall come into force on the date of their notification in the Official Gazette.
Definitions
2. In these regulations, unless the context otherwise requires:
(a) ‘Act’ means the Insurance Regulatory and Development Authority Act, 1999 (41 of 1999);
(b) ‘Authority’ means the Insurance Regulatory and Development Authority established under sub-section (1) of section 3 of the Act;
(c) ‘Cedant’ is an insurer who enters into a reinsurance contract or a reinsurer who enters into a retrocession contract;
(d) ‘Cession’ means the part of insurance passed to a reinsurer by the insurer which issued a policy to the original insured or part of contract ceded by a reinsurer to a retrocessionaire;
(e) ‘Cover note’ is a written document issued by the reinsurer or the reinsurance broker authorized by it, detailing the contract terms and conditions of the contract and the details of the percentage of risk placed with each reinsurer;
(f) ‘Facultative’ means the reinsurance of a part or all of a single policy in which cession is negotiated separately and that the reinsurer and the insurer have the option of accepting or declining each individual submission;
(g) ‘Indian reinsurer/s’ means the insurer/s who carry on exclusively reinsurance business and is notified in this behalf by the Authority under section 101A of Insurance Act.
(h) ‘Pool’ means any joint underwriting operation of insurance or reinsurance in which the participating insurer/s or reinsurer/s assume a predetermined and fixed interest in all business written;
(i) ‘Retrocession’ means the transaction whereby a reinsurer cedes to another insurer or reinsurer all or part of the reinsurance it has previously assumed;
(j) ‘Retention’ means the portion of the risk which an insurer assumes for his own account;
(k) ‘Reinsurance contract’ is the legally binding document on all the parties that provide a complete, accurate and definitive record of all the terms and conditions and other provisions of the reinsurance contract;
(l) ‘Treaty’ means a reinsurance arrangement between the insurer and the reinsurer, usually for one year or longer, which stipulates the technical particulars and financial terms applicable to the reinsurance of some class or classes of business;
(m) Words and expressions used and not defined in these regulations but defined in the Insurance Act, 1938 (4 of 1938) or the General Insurance Business Nationalisation Act, 1972 (57 of 1972) or Insurance Regulatory and Development Authority Act, 1999 (41 of 1999), rules made thereunder shall have the meanings respectively assigned to them in those Acts or rules as the case may be.
CHAPTER II
3. Procedure to be followed for Reinsurance Arrangements
(1) The Reinsurance Programme of every (re)insurer shall be guided by the following objectives to:
(a) Maximize retention within the country;
(b) Develop adequate capacity;
(c) Secure the best possible protection for the reinsurance costs incurred;
(d) Simplify the administration of business.
(2) Every (re)insurer shall maintain the maximum possible retention commensurate with its financial strength, quality of risks and volume of business. The Authority may require an (re)insurer to justify its retention policy and may give such directions as considered necessary in order to ensure that the Indian (re)insurer is not merely fronting for a foreign insurer.
(3) Every insurer shall cede such percentage of the sum assured on each policy for different classes of insurance written in India to the Indian reinsurer/s as may be specified by the Authority in accordance with the provisions of Part IVA of the Insurance Act, 1938.
(4) The reinsurance programme of every (re)insurer shall commence from the beginning of every financial year. Every (re)insurer shall submit to the Authority, his reinsurance programme for the forthcoming year, 45 days before the commencement of the financial year. Notwithstanding what is stated above, the Authority, if it considers necessary, may direct the (re)insurer to carry out changes to the reinsurance programme filed with it and the (re)insurer shall incorporate such changes forthwith in their reinsurance programme.
(5) The (re)insurers shall ensure that the reinsurance arrangements in respect of catastrophe accumulations, using various realistic disaster scenario testing are adequate and approved by their Board of Directors before filing the same with the Authority along-with their reinsurance programme.
(6) Within 30 days of the commencement of the financial year, every (re)insurer shall file with the Authority a copy of every reinsurance treaty contract wording and excess of loss cover covernote in respect of that year together with the list of reinsurers their ratings and their shares in the reinsurance arrangement. All reinsurance arrangements must be documented and filed with the Authority within 30 days of commencement of the financial year.
(7) The Authority may call for further information or explanations in respect of the reinsurance programme of an (re)insurer and may issue such direction, as it considers necessary.
(8) Every (re)insurer shall file with the Authority any new reinsurance arrangement, giving full details, documentation, reasons for such an arrangement together with the approval of the Board of Directors within 15 days of holding the Board meeting. The (re)insurer shall further ensure that the renewal of such a reinsurance arrangement coincides with financial year.
(9) (Re)Insurers shall place their reinsurance business outside India with only those reinsurers who have over a period of the past five years counting from the year preceding for which the business has to be placed, enjoyed a credit rating of at least BBB (with Standard & Poor) or equivalent rating of any other international rating agency. The (re)insurers shall consider past claims performance of the reinsurers while accepting their participation in the reinsurance programme. Placements with other reinsurers shall require the approval of the Authority. (Re)Insurers may also place reinsurances with Lloyd’s syndicates taking care to limit placements with individual syndicates to such shares as are commensurate with the capacity of the syndicate.
(10) The Indian Reinsurer shall organise domestic pools for reinsurance surpluses in fire, marine hull and other classes in consultation with all insurers on basis, limits and terms which are fair to all insurers and assist in maintaining the retention of business within India at such percentages as the Authority may specify from time to time. The arrangements so made shall be submitted to the Authority within three months of the formation of such pools, for approval.
(11) Surplus over and above the domestic reinsurance arrangements class-wise can be placed by the (re)insurer independently with any of the reinsurers complying with sub-regulation (7) subject to the following limits of the total reinsurance premium ceded outside India being placed with any one reinsurer:
| Rating of Reinsurers (as per Standard & Poor and applicable to other equivalent international rating agencies) | Limit of cession allowed under Regulation 3(11) | |
| BBB of Standard & Poor | 10% | |
| Greater than BBB and upto & including AA of Standard & Poor | 15% | |
| Greater than AA upto & including AAA of Standard & Poor | 20% |
Where it is necessary in respect of specialised insurance to cede a share exceeding such limit to any particular reinsurer, the (re)insurer may seek the specific approval of the Authority giving reasons for such cession.
(12) Every insurer shall offer an opportunity to the Indian Reinsurer to participate in its facultative and treaty surpluses before placement of such cessions outside India. The Indian reinsurer shall set up appropriate market-wide reinsurance arrangements for this purpose.
(13) Every (re)insurer shall be required to submit to the Authority information and returns relating to its reinsurance transactions in such forms as the Authority may specify or require together with its annual accounts.
Inward Reinsurance Business
4. (1) Every (re)insurer wanting to write inward reinsurance business shall have a well-defined underwriting policy approved by its Board of Directors for underwriting inward reinsurance business.
(2) The (re)insurer shall file with the Authority, at least forty five days before the commencement of each financial year, its underwriting policy stating the classes of business, geographical scope, underwriting limits and profit objective.
(3) The (re)insurer shall ensure that decisions on acceptance of reinsurance business are made by persons with necessary knowledge and experience.
(4) The (re)insurer shall also file any changes to the underwriting policy as and when a change is made duly approved by its Board of Directors.
Outstanding Loss Provisioning
5. (1) Every (re)insurer shall make outstanding claims provisions for every reinsurance arrangement accepted on the basis of loss information advices received from Brokers/Cedants and where such advices are not received, on an actuarial estimation basis.
(2) In addition, every (re)insurer shall make an appropriate provision for incurred but not reported (IBNR) claims on its reinsurance accepted portfolio on actuarial estimation basis.
