IRDAI Relaxes Norms Relating to Foreign Reinsurance Branches

Mumbai: In a move aimed at attracting more reinsurers to establish operations in India, the Insurance Regulatory and Development Authority of India (IRDAI) has halved the minimum capital requirement for setting up foreign reinsurance branches (FRBs) from Rs 100 crore to Rs 50 crore with the provision to repatriate any excess assigned capital.

These and several amendments were made to the Reinsurance Regulations. The  amendments aligned the regulatory framework for International Financial Services Centre Insurance Offices (IIOs) with International Financial Services Centres Authority (IFSCA) regulations to remove dual compliance.

The format for reinsurance programs has also been simplified, and regulatory reporting requirements have been rationalized for increased clarity and effectiveness.

"The overarching objective of these amendments is to harmonize and
streamline the existing regulations that apply to Indian insurers, Indian reinsurers, Foreign Reinsurance Branches (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," the insurance regulator said in a statement on Thursday.

A spokesperson for HDFC ERGO General Insurance explained, "There are several small reinsurers from Japan such Tokio Marine or US reinsurers such as Everest Re, Ariel Re who have not yet set up shop in India. The new norms would encourage many global reinsurance companies to enter India. Sexindly, the amended Order of Preference for International Financial Services Centre Insurance Offices (IIOs) and FRBs will increase competitiveness, benefiting the sector."

The order of preference, previously spanning six levels, has been
streamlined to four levels.

Cross Border Reinsurers (CRBs) operating in India will have to retain a minimum 50 per cent premium by way of premium deposit with the clients. It will be the responsibility of the insurers to maintain this premium in a separate designated or escrow account as well as to invest such amount into government bonds.CBRs don’t have any offices in India and just have to register with the IRDAI to get business through brokers.

IRDAI said that its effort is to increase the overall capacity of the reinsurance sector, which can help accommodate growing demand and manage larger risks.