(General Insurance -- Reinsurance) Regulations 2000

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C C ('ll'Tlll -~4) '<mf>nl=:arni= INSURANCE REGULATORY AND DEVELOPMENT AUTEIORITY NOTrFICATIO.N New Delhi. 1.hc 14th July, 2000 (General Insurance-Rei n$ur1111ce) Rei,,lations. 2000 F. No. IRDA/Rcg/7/2000.- 111 exercise of the powers conforrcd t>y section I 14A of the Insurance Act, 1938, sections 14 and 26 of the Insurance Regulatory and Development Aurhority Act, 1999, the Authority. in consuhation with the Insurance Advisory Committee, hereby makes the following regulations, namelv: CHAPTER T PRELlMTNARY 1. Short title and commencement : (I) These regulations may be called the Insurance Regulatory and Development Authority (General Insurance - Reinsurance) Regulations, 2000. (2) They shall come into force 011 the date or their notifica1ion in the Official Gazette. 2. Definitions: In these regula11ons, unless the context othe1wtse requires: a) • Act' means rhc Insurance Regulatory .and Development Authority Act 1999 (41 of 1999); b) 'Authority' means the Insurance Regulatory and Development Authority establ\shed under sub-section (I) of Section J or1he Act: c} 'cession' means the unit of insurance rassed to a reinsurer by the insurer which issued a policy to the ongi11al insured ru,d. accordingly, a cession may be the whole or a portion of single risks, defined policies or defined divisions of business, as agreed in the remsurance contract: 5 I! I 6 THE GAZETTE OF INDIA: EXTRAORDINARY d) 'facultative' means the reinsurance of a part or all of a single po hey in which cessicn is negotiated separately and thai the reinsurer and the insurer have the option of accepting or dcclinmg each individual submission; e) 'Indian re-insurer' means an insurer who carries on exclusively reinsurance business ano is approved m this behalf by the Central Government; fl 'pool' means any joint underwriting operatio11 of insurance or remst1rancc 111 which the particirants a.,surne a predetem1ined and fixed interest in all busines~ wrillen g) 'rciroccssion· means the tran~«c!Jon whereby a remsurer cedes to another insur.::r or rcinsurer all or par1 or th~ reinsurance u has previously assumed; h) 'rctcnticm' means the ;.imount which an insurer assumes for hi~ o,\n .-:ccou,,t In proportiona?e contracts. the retention may be a perccotage of the policy limn. In excess of !oss contrncts, the retcn!lon 1s an amount of loss; i) 'I re11ty' means a rr.msurancc arrangement betwet!n the insurer and the re1nsurcr. usual1y for nnl' ye,1r or !rmger. which stipulates the technical pamculars and linanrial tem1s applicable to the reinsurance of some class or classes of hus1ness; j) Words and exrrcssions used and not defmcd m these rt,gulations hut ddined in 1he Insurance Act. I 1lJ8 t.1 of 1938) 0r the General Insur:1nee Busine,s ,\Jui:onaHsattr.n Act. 1972 (57 of l 972) o, Insurance Regulatory and Development A111hority Act, 1999 (41 of 1999). rules made thereunder shall have the meauings rcspccuvcl} assigned to th,·111 in thos'.! Acts orrn!es as the case may he. 3. l'HOCEDL:IU: TO BE FOLLO\VED FOR REINSURANCE ARRANGEMEI\TS (I) rhe Reinst1rance Programme shall continue to he guided by the following ohJectivcs to: a) maximise retention w1th111 the country; b) develop adcqL1:1te capacity; c) secure the best possihle prolec1ion for the reinsur~ncc cosL~ rncurred; d) simplify the udnu111suarion oil>usmcss. (2) E,·ery 111wrer slrnll maimain th<:' maximum possible retention commensurate with its financial strength and v(1lume of business. The Authority may re.quire an insurer to justify its retent ion policy and may give suc.h directions as considered necessaty in order to ensure that the lndmn insurer i~ not merely fronting for a foreign insurer. (3) Ever; insurer shall cede such percentage of the sum assured on each policy for different classes of insurance written in India to the lndian retnsurer as may be specified by the Authonty in accordance with the provisions of Part JV A of the Insurance Act, 1938. (4) The reinsurance programme or every insurer shall commence from L'le beginnjng of every tinancial year and (•very insurer shalJ submit to rhe Authority, his reinsurance programmes for the forthcoming year, 45 days before the commencement of the finnncial year: , 5) Withm 3() days of the commencement of the financial year. every insurer shall tile wnh the Authority a photocopy of evel) reinsurance treaty slip am! excess of loss cover coveinote in respect of that year together with the list of reinsurers and their shares m the reinsurance arrangement; .,. ((,) rhe Authority may call for further mfonnation or explanations in respect of the n:111surancc prngramme ,if an insurer and may issue such direction, as it considers 11.::ccs.~:iry; (7) Insurers slwll place their reinsurance business ou~s1de India with only those rc1m;urers who have over a period of the past five years counting from I.he year preceding for which the business h:is to be placed, en.joyed a rating of at least BBB (with Standard & Pobr) or equivalent rating of any other international rating ag<'ncy Placements with other reinsurer:s shall require the approval of the A 11rl1oriry. Insurers m:.iy ~!so place rc111sura11ces with Lloyd's syndicates taking care to limn placements with individual syndicates to s,1ch shares as arc commensurate with the capacity oftlie syndicate. <8) The Indian Rcinsurer shall organise domestic pools for rnmsurancc surpluses in fire, nrnrinc hull :.1nd other classes in eonsultat1on with all insurers on basis. limits and Lenns which arc fair to all insure-rs and :assist in maintaining the retention of husi11css within India as close to the level acliieved for the year 1999-2000 as possible. The arrai1gements so made shall b.: submitted to the Aur.hority withm three months of these: regulations coming 11110 rorce, for approval. (9) SLJrplus over and above the dotncstic reiJ1su1 ance arrangements class wise can be placed oy the insurer independc111ly with any of the rcinsurers complying with sub• rcg11Ja11on t 7) s.ub1ect ro a limit of IO% of the total reinsurance premium ceded nutsidc India being placed with any one rcinsurer. Where 11 is necessary in respect of specialised insurance to cede a share exceeding such limit to any particular re insurer. the insurer may seek the specific approval of the Authonty g iving reasons for such cession. ( I fl) Every insurer slwll offer an oppommuy to other Tnd1an insurers including the rndian Reinsurcr to pan1c1pare in its facultative and treaty surpluses before plac.:ment 0fsuch cessions outside India. 7 8 THE GAZETTE-OF !NOIA : EXrRAORDINARY [PART ill Sw. 4] ( 11) The lndian Reinsurcr shall rctrocede at least 50% of the obligatory cessions received by it to the ceding insurers after protecting lhe portfolio by suitable excess of loss covers. Such rctrocession shall be at original terms plus an over-riding commission to the Indian Rcinsurer not exceeding 2.5%. The relrocession to each ceding insurer shal I he in proportion to its cossions to the Indian Rcinsurer. (12) Every insurer shall be required to submit to the Aulhority statistics relating to its reinsurance transactions in such fonns as the Authority may specify, together with its annual accounts, 4 Inward Reinsurance Business: Every insurer wanting to write inward reinsurance business shall haw a well-defined underwriting policy for underwritmg inward remsurnncc business. The insurer shall ensure that decisions on acceptance of re111surance hus1ness are ma<le by persons with necessary knowledge and experience. TI1c insurer shall file with the Authority a note on its underwriting policy stating the classes of business. geograplucal scope, underwriting limits and profit objective. The insurer shall also file any changes io the note as and when a change in underwriting policy is made. 'i. Outstanding Loss Provisioning ( I) Every insurer shall make outstanding c laims prov1s1ons for every reinsurance arrangement accepted on the basis of loss information advices received from Brokers/ ('ctlants and where such advices are not received, on an actuatial estimation basis. (2) In a<ld1t1un, every msurer shall make an appropriate provision for incurred btrt not rcponcd (IBNR) claims on its reinsurance accepted portfolio on acwarial estimation hasis. N. RANGACHARY. Chnirpcrson [No. ADVf.-3/4/Exty/ l6l/200()] Vnnted ~ythe M;a.m1ger, Oo~ (If India Ptc"l, Ring R.oa.d, Ma)'llpuri, Ne:w Delhi-1 l0064 :i.nd Published by the Controller of Publi-;,;a.lions. Delhi• I IOOS4 2000.