Page 57 - Insurance Times February 2021

Circular

IRDAI Circular

Obligatory Cession for the financial year b) Commission:
2021-22 Percentage of commission on obligatory cession for
different classes of business shall be as follows:
IRDAI/RI/6/172/2020 i) Minimum 5% for Motor TP and Oil & Energy
Date:04-01-2021 insurance.
ii) Minimum 10% for Group Health insurance.
1. Applicability: This notification shall be applicable to iii) Minimum 7.50% for Crop Insurance.
Indian Re-insurers and other applicable insurers as per
the provisions of Section 101A of the Insurance Act, iv) Average Terms for Aviation insurance.
1938. v) Minimum 15% for all other classes of insurance
2. Percentage of Cession: The percentage cession of the business.
sum insured on each General Insurance Policy to be Commission over and above, can be as mutually
reinsured with the Indian Re-insurer(s) shall be 5% (five agreed between Indian Re-insurer(s) and the
percent) in respect of insurance attaching during the ceding insurer.
financial year beginning from 1st April, 2021 to 31st c) Profit Commission:
March, 2022, except the terrorism premium and The Indian Re-insurer shall share the profit
premium ceded to Nuclear Pool, wherein it would be commission, on 50%:50% basis, with the ceding
made ‘NIL’. The entire Obligatory Cession is to be placed insurer based on the performance and surplus of
with General Insurance Corporation of India (GIC Re) the total obligatory portfolio of the ceding insurer,
only. after factoring the following:
3. Terms & Conditions: i) Incurred loss % (to be worked at the end of 3
a) Notice of information on cession: financial years).
i) There would be no limit on sum insured ii) Management Expenses at 2%.
applicable for the cessions made during the
period from 1st April, 2021 to 31st March, iii) Profit at 5%.
2022. iv) Commission at 15%.
ii) In view of the above, the Indian Re-insurer may v) Loss ratio at 50% to 78%.
require the ceding insurer to give immediate No profit commission is payable if the loss ratio exceeds
notice of underwriting information of any 78%. Profit commission shall not exceed 14%.
cession exceeding an amount as specified by
the former. The ceding insurer shall inform the Dr. Subhash C. Khuntia
Indian Re-insurer at all times whenever the Chairman
cession exceeds such specified limits.
The Insurance Times, February 2021