Page 58 - The Insurance Times April 2025

Contracts in Government Securities) Directions,2025. 1. Applicability: This notification shall be applicable to In-
Under these directions, it is specified that any entity, dian Re-insurers and other applicable insurers as per the
eligible to be classified as a non-retail user shall be eli- provisions of Section 101A of the Insurance Act, 1938.
gible to undertake transactions in Forward Contracts in
2. Percentage of Cession: The percentage cession of the
Government Securities (Bond Forwards) as a user. sum insured on each General Insurance Policy to be
3. In view of the above directions and considering insur- reinsured with the Indian Re-insurer(s) shall be 4% (four
ers requests for introduction of Bond Forwards, insur- percent) in respect of insurance attaching during the
ers are hereby permitted under clause 13 of Schedule financial year beginning from 1st April, 2025 to 31st
III of IRDAI (Actuarial, Finance and Investment Func- March, 2026, except the terrorism premium and pre-
tions of Insurers) Regulations,2024 to undertake trans- mium ceded to Nuclear pool wherein it would be made
actions in Bond Forwards as users for hedging purpose ‘NIL’. The entire Obligatory Cession is to be placed with
subject to the following conditions: General Insurance Corporation of India (GIC Re) only.
i. Insurers shall undertake only long positions in Bond 3. Terms & Conditions:
Forwards i.e. buying Bond Forwards; a) Notice of information on cession:
ii. Bond Forwards are not permitted for ULIP business; i) There would be no limit on sum insured appli-
cable for the cessions made during the period
iii. Insurers shall comply with provisions of paras 1.8 a
(C to J) of Chapter 3 of the Master Circular on IRDAI from 1st April 2025 to 31st March, 2026.
(Actuarial, Finance and Investment Functions of ii) In view of the above, the Indian Re-insurer may
Insurers) Regulations,2024 i.e conditions of Permit- require the ceding insurer to give immediate
ted Purpose, Regulatory Exposure and Prudential notice of underwriting information of any ces-
norms, Documentation Requirements, Accounting, sion exceeding an amount as specified by the
Internal Risk Management Policy & Process, Suit- former. The ceding insurer shall inform the In-
ability and Appropriateness Policy, Corporate Gov- dian Re-insurer at all times whenever the ces-
ernance and CRO role & responsibilities prescribed sion exceeds such specified limits.
for Interest Rate Derivatives; b) Commission:
iv. Insurers shall report the transactions in the Bond For- Percentage of commission on obligatory cession for
wards on quarterly basis in line with reports stipu- different classes of business shall be as follows:
lated for Interest Rate Forward Rate Agreements; i) Minimum 5% for Motor TP and Oil & Energy
insurance.
v. Insurers shall comply with RBI directions issued for
Bond Forwards as amended from time to time; ii) Minimum 10% for Group Health insurance.
vi. Insurers shall comply with Operational Guidelines iii) Minimum 7.50% for Crop Insurance.
issued by Fixed Income Money Market and Deal- iv) Average Terms for Aviation insurance.
ers Association of India(FIMMDA) with respect to v) Minimum 15% for all other classes of insurance
settlement basis and market conventions etc., as
business.
amended from time to time.
Commission over and above, can be as mutually
This circular is issued with approval of the Competent Au-
agreed between Indian Re-insurer(s) and the ced-
thority. ing insurer.
c) Profit Commission:
Obligatory Cession for the Financial Year 2025-26 The Indian Re-insurer shall share the profit commis-
28th February, 2025 sion, on 50:50 basis, with the ceding insurer based
on the performance and surplus of the total obliga-
F. No IRDAI/RI/6/213/2025.— In exercise of the powers con- tory portfolio of the ceding insurer, after factoring
ferred by Sub-section (2) and (4) of the Section 101A of the the following:
Insurance Act, 1938, the Authority, after consultation with i) Incurred loss % (to be worked at the end of 3
the Advisory Committee, constituted under section 101B of financial years).
the Insurance Act, 1938 and with the previous approval of ii) Management Expenses at 2%.
the Central Government, hereby makes the following noti- iii) Profit at 5%.
fication namely:- “Obligatory Cession for the financial year
2025-26”. iv) Commission at 12.5%.

52 April 2025 The Insurance Times