The Insurance Regulatory and Development Authority (IRDA) in the month of March 2013 have made the norms stricter for reinsurers. As per IRDA (General Insurance – Reinsurance) Regulations 2013, the tough norms have been put in place for selecting reinsurers outside India.
It is Evident that in the reinsurance trade, multiple insurance companies share the risk by purchasing insurance policies from other insurers to limit the total loss the original insurer would face in the case of a disaster.
So, As per the new IRDA norms, insurers is supposed to place their reinsurance business outside India with only those insurers who have a credit rating of at least BBB with Standard & Poor’s, or an equivalent rating by any other international agency for the past five years.
The past claims performance of the reinsurers should also be considered while accepting their participation in the reinsurance programme.
The IRDA also asserted that the domestic pool for reinsurance surpluses in fire, marine hull and other classes should be organised in consultation with all insurers on fair ground for retention of business with India in prescribed ratios.
According to the regulator, the Prime objectives of reinsurance programme, is to maximise retention (the portion of risk which an insurer assumes for its own account). The net preservation of non-life insurers increased to 91.84 per cent in 2011-12 from 88.24 per cent in the preceding year.