IRDAI sets up Committee to Decide Order of Preference in Reinsurance

Insurance Regulatory and Development Authority of India (IRDAI) has set up a committee to make a decision on the order of preference in reinsurance cessions. The committee to be chaired by M Rama prasad will have members from life insurance, general insurance industry, health insurance industry as well as representatives from General Insurance Corporation of India, General Insurance Council, Marsh India, Lloyd's and Munich Re.The committee will look into laying down the procedure and modus operandi for order of preference for cessions in respect of all life, general and health insurance business.Further, it will also look at guidelines for implementation of the said procedure including spelling out the rights and obligations of all stakeholders involved.

It would also look at timelines for offer of best terms, order of preference-wise. In December 2015, foreign reinsurers were sent into a tizzy with an Insurance Regulatory and Development Authority of India (Irdai) proposal giving preference to Indian reinsurers in treaty reinsurance. Several foreign reinsurers, including Swiss Re, Munich Re, and RGA (Reinsurance Group of America), have received R1 or initial license from Irdai.

Foreign reinsurers had contested that these proposed norms discriminated against foreign reinsurers and violated the principle of fair trade practices. IRDAI in this proposal had suggested that an Indian insurer should give preference to a foreign reinsurer. Only if this doesn't work out, can it approach those foreign reinsurers who have the requisite licence. The Committee will submit its report  including draft guidelines on or before December 9,2016.