Branch offices in India must retain 50% of risks
The Insurance Regulatory and Development Authority of India (IRDAI) has unveiled details on the rules that will govern branch offices formed by foreign reinsurers in the country.
Notably, it has stipulated that at least 50 percent of the risks underwritten by a branch office must be retained in that legal entity. It has also said that entity must be capable of underwriting the risks and settling claims.
This follows the passage of the Insurance Laws (Amendment) Act 2015, which has raised foreign direct investment (FDI) cap in the insurance sector to 49 percent from 26 percent.
The draft regulations cover the registration and operations of branch officers of foreign re/insurers in India.
The regulator also unveiled criteria for the companies forming branch offices in the country.
Re/insurers must have clearance from their own regulator, have net owned funds of Rs5,000 crore, a minimum credit rating of BBB+ from an international rating agency, have been in business for at least 10 years and have a minimum assigned capital of Rs50 crores.
The regulator has also said that Indian insurers must also offer an Indian reinsurer first refusal to participate in its facultative and treaty surpluses. The reinsurer may then offer the opportunity to the branch offices of foreign reinsurers or the Lloyd’s office in India.