Page 13 - Insurance Times January 2023

and to allow motor add-ons cotermi- put out by the Department of Financial minimum of 50 per cent of their Indian
nous motor third-party liability cover, Services in the Finance Ministry for reinsurance business underwritten,
according to an exposure draft. comments by December 15 - are in- within the country.
tended to among other things facilitate
The pricing of long-term policies is to Also, any retrocession to an IIO (Inter-
entry of more players leading to eco-
be made based on sound actuarial prin- national Financial Service Centre Insur-
nomic growth, employment generation
ciples considering all the relevant as- ance Office) up to 20 per cent of Indian
and enabling ease of doing business.
pects of rating, including claims experi- reinsurance business underwritten shall
ence, reduced policy and administration Once composite licences are allowed, in- be adjusted against the required mini-
and acquisition costs given higher re- surers can undertake life, general or mum retention of 50 per cent, the
newal rates, among others. health insurance under one entity. Pro- regulator has said. IIO means a branch
spective insurers can even apply for sub- office that has been opened by a for-
The long-term motor own damage
classes like accident and motor insurance. eign entity to transact direct insurance
policy would have a 30 day free-look
business or reinsurance business, as
period from the date of the inception Anil PM, Head - Legal, Compliance and
permitted by the regulator.
of the policy to enable the policyholder Fraud Prevention Unit, Bajaj Allianz Life
review the terms and conditions. They Insurance, said: "The proposal for a IRDAI had first placed an exposure draft
would also be entitled to a refund of composite insurer will align Indian in- for public consultation on reinsurance
premium on a pro-rata basis in the event surance with global markets. Such an rules in October. Based on feedback
of exercising free-look cancellation. insurer will be able to meet the mul- from stakeholders, it modified the rules
tiple insurance requirements of a cus- slightly and called for comments and
'Composite licence' leads tomer (life /health / property)". suggestions by December 16. The
amended regulations will come into ef-
the Centre's proposals to fect on April 1, 2023.
Reinsurers asked to retain
amend insurance, IRDAI "The objective of the amendments is to
50% of business underwrit-
laws harmonise the provisions of various
ten in India regulations applicable to Indian insur-
The Centre has proposed several
IRDAI has, in a revised exposure draft ers and Indian reinsurers, including For-
amendments to the Insurance Act and
on reinsurance regulations, mandated eign Re-insurance Branches (FRBs) and
the Insurance Regulatory and Develop-
that Indian reinsurers, including foreign Lloyd's India, and to enhance ease of
ment Authority Act as part of its overall
reinsurance branches, have to retain a doing business," the regulator said.
effort to encourage product innovation
and diversification so as to achieve the
goal of 'insurance for all' by 2047. IRDAI endorses panel's view to cut obligatory
These proposals - once adopted after
cession to zero from 4%
receipt of public and stakeholder com-
The committee that recommends the percentage of obligatory cession that
ments - are likely to find their way into
general insurers have to cede to state-owned General Insurance Corporation
an Insurance Amendment Bill. Alterna-
(GIC Re) has suggested that the obligatory cession be brought down to zero
tively, these could form part of the Fi-
from the existing 4 per cent. This is a view that has been endorsed by IRDAI,
nance Bill, 2023 as part of the Budget,
said its chairman Debasish Panda.
sources said.
"There is a committee, which the government appoints every year to recom-
On the anvil are a slew of major reforms
mend this. The committee has given its recommendations and we have sent
including introduction of concept of
'composite insurance licence'; captive them to the government, endorsing their recommendations. The committee
insurers; differential minimum capital has said that the obligatory cession should be reduced to zero," Panda said.
requirement after opening up registra- The obligatory cession was reduced from 5 per cent to 4 per cent in FY23. The
tion to various classes, sub-classes and
regulator has been reducing the obligatory cession over time.
typesof insurers; allowing services to
Earlier it was 20 per cent, which came down to 15 per cent, then to 5 per cent
insurers that are incidental or related
and now 4 per cent.
to insurance business; and allowing in-
surers to distribute other financial prod- Slowly, the regulator is making sure that the compulsory cession goes down
ucts as specified by IRDAI. and more re-insurers get into the market to develop India as a reinsurance
The latest proposals - which have been hub.

The Insurance Times January 2023 11