Europe’s insurance lobby calls for removal of ‘restrictive’ Indian reinsurance rules

Industry body  Insurance Europe Reinsurance Advisory Board (RAB), the European insurance and reinsurance federation, has responded to a consultation by the Insurance Regulatory and Development Authority of India (IRDAI) on its draft amendments to its reinsurance regulations, and called for removal of remaining “unnecessary barriers for foreign carriers”.

IRDAI is said to have proposed to bring foreign reinsurance branches (FRBs), Lloyd’s India and International Financial Services Centre Insurance Offices (IIOs) on a par with the state reinsurance company.

RAB believes IRDAI’s proposed changes on order of preference “would deliver positive developments” towards a more open and balanced reinsurance market, but highlighted that such changes should be made in conjunction with other amendments to existing laws and regulations to create a proper level playing field for FRBs. In particular, FRBs should be considered as being resident under the Income Tax Act, it noted.

Additionally, requirements for the maintenance of assigned capital or repatriation of capital/surplus applicable to FRBs should be removed or eased, RAB said in a statement to the market. Restrictions on the outsourcing of functions “severely affect the ability of FRBs to benefit from processes”, it said.

Furthermore, the RAB opposes the proposed requirement for cross-border reinsurers (CBRs) to retain 50% of premium with their cedants by way of collateral. Similarly, the RAB recommends removing the 50% retention of reinsurance premium by locally domiciled branches of foreign reinsurers.

While the RAB supports the increase in the maximum cession limit for CBRs, the RAB urges the IRDAI to “reconsider its current regime of restrictive practices and to pursue a regime under which all cession limits are lifted”.

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