Page 56 - Insurance Times January 2023

Circular

IRDAI Corner

Reinsurance Treaty Agreements covering effectively discourage risk management along with the
loss prevention/ mitigation investments of insurance
Fire and Engineering Lines of Business -
buyers.
prohibition of provisions that make for
3. The Authority acknowledges that every Reinsurer
broad market price tariffs should have the freedom to price its reinsurance prod-
uct and freely negotiate terms of trade with its
19th December, 2022
counterparties i.e. 'Cedants' (Insurers).
1. The Authority has been working on reforms in the Non- However, terms of trade shall not be an impediment
Life Insurance Sector to enable ease of business from on the freedom of the 'Cedant' (Insurer) to freely com-
the viewpoint of Insurers as also to enable choice for pete, negotiate, price and assume risks via its own con-
insurance buyers/ consumers and create a free-market tracts of insurance with its clients i.e. 'insurance buy-
regime that fosters prudent risk management and loss ers'.
control. Towards this, the Authority had progressively
The Authority hereby advises all Non-life insurers and
de-notified various tariffs including the Fire and Engi-
reinsurers to ensure that IIB published broad-occupancy
neering Tariffs prices set up by the erstwhile Tariff Ad-
market average burning costs rates for Fire and Engineer-
visory Committee.
ing risks are not embedded as minimum rates within Rein-
In a background of reports and market feedback, the surance Treaty Agreements applying to the Indian Market
Authority vide its Circular dated 12th May, 2022 clari- for the risks commencing on and after 1st April 2023.
fied that the IIB published only broad-occupancy mar-
ket average burning costs (commonly now referred to Constitution of Working Group for suggest-
as "IIB rates") for Fire and Allied perils and these were ing the regulatory framework post de-no-
not to be interpreted/ operated as a minimum man-
tification of the existing tariffs
dated rate.
Date: 07-12-2022
2. The Authority has observed that Reinsurance Treaty
Agreements in many instances include, as a precondi-
A. Pursuant to the withdrawal of the tariffs to rates, terms,
tion or prescription, the requirement to apply the IIB
conditions and regulations applicable to Fire, Engineer-
published broad-occupancy market average burning
ing, Motor, Workmen’s Compensation and other classes
costs, as minimum risk rates.
of business by the Tariff Advisory Committee vide its cir-
Such prescription by any Reinsurer that effectively cre-
cular ref. TAC/7/06 dated 4th December 2006 effective
ates / reinstates a market (price) tariff is not in line with
from 1 January 2007, the Authority, vide notification
the de-tariffed pricing regime currently in vogue and
dated 4th December, 2006 stipulated that the Tariff
would distort the level playing field intended to be pro-
general regulations (other than those relating to rating),
vided by the Authority.
terms, conditions, clauses, warranties, policy and en-
The said Treaty Agreement provisions do not acknowl- dorsement wordings applicable to the above mentioned
edge individual risk quality or accident / loss history and classes of business as well as Marine Hull insurance busi-
48 January 2023 The Insurance Times