Page 40 - Life Insurance Today May 2016
P. 40
Insurance Regulatory
And Development
AuthorityNews
Lloyd's gets regulations from IRDAI for operations in IRDAI asks for investment
plan from global reinsurers
India
IRDAI has asked four global reinsur-
The Insurance Regulatory and Devel- their service company shall transact ance companies -
opment Authority of India (IRDAI) has reinsurance business with Indian in- Hannover Re,
issued regulations to enable Lloyd's, a surers, as well as reinsurance business Swiss Re, Munich
global player in the insurance and re- outside India in accordance with their Re and Scor - to
insurance market, to set up business laid down underwriting policy," the submit compre-
in India. Following the pas- hensive business
sage of the Insurance Laws regulation said.
(Amendment) Act, 2015, plans and investments details for the
Lloyd's UK has been permit- IRDAI has said that the syn- country. The Regulator has given in-
ted to set up a branch office dicates desiring to carry on principle approval to the four
in India. reinsurance business reinsurers to set up shop in India.
through Lloyd's India will
Lloyd's India, being a market, shall need to have net owned funds of Rs. "These re-insurers must show how
ensure that the market and the con- 5,000 crore. The regulator has also they will work in India, what will be
stituents are housed within an office said that the syndicate placing reinsur- their organisation structure, what
location of Lloyd's India for the con- ance business through Lloyd's will systems they will put in place. We
duct of reinsurance business, IRDAI have two categories -minimum reten- will study it and then approach the
said in its regulation. tion of business will be 50 per cent, board to give a final licence," said
and the syndicate will retain 30 per Nilesh Sathe, member- life, IRDA
"Syndicates of Lloyd's India through cent of the reinsurance business. and a senior board member.
IRDAI will not allow insurers to invest in perpetual bonds Most global re-insurance companies
serve Indian customers through off-
The insurance regulator plans to stick bonds are not redeemable but pay a shore offices, which have led to flow
to its stand of not allowing insurers to steady stream of interest forever. In- of premium payment out of the
invest in perpetual bonds issued by cidentally, some public sector banks country. With the companies setting
public sector banks to shore up their have reportedly approached cash-rich up offices in India, this trend will
tier-1 capital. PSUs to subscribe to these bonds. likely end and would also help the
companies understand local risks
In the past, the RBI had pitched for One factor that has affected the issu- better, and could lead to products
insurers such as Life Insurance Corpo- ance of such instruments is the invest- better tailored for the country, ana-
ration (LIC), which are large domestic ment limitations faced by the Employ- lysts said. "Foreign reinsures would
institutional investors, to subscribe to ees' Provident Fund Organisation be in a stronger position to leverage
these bonds arguing that it could be (EPFO). technical expertise and blend with
an important source for raising the local knowledge base," said Hitesh
Basel-III compliant tier-1 capital. According to the notification issued Kotak, chief representative for Indian
last year, investments in tier-I bonds subcontinent, Munich Re.
A perpetual bond is a financial instru- for the EPFO cannot exceed 2 per cent
ment with no maturity date. These of the total portfolio of the fund. Life Insurance Today
40 May 2016
