Global reinsurance companies rethink India entry plans

MUMBAI: Global reinsurance companies are reviewing their plans to enter India following the Insurance Regulatory and Development Authority's ( Irda) decision to grant the first right of refusal for risks underwritten in the country to the national reinsurer GIC Re.

About half a dozen reinsurers including RGA, Munich Re and Hannover Re had applied to Irda after the amendment of the Insurance Act in March allowed overseas firms to set up shop in India.

"We are now reviewing our application to enter India to decide whether to call back our application, put it in abeyance or go ahead with it," said a senior executive with a reinsurer, who did not wish to be identified.

At a meeting held by IRDA on November 24 that was attended by a nominee of the central government, it was decided that Indian insurers should not be treated on a par with foreign reinsurers and branch offices of foreign reinsurers as they undertake direct insurance business and do very little reinsurance business.

"GIC Re being an Indian reinsurer should enjoy preference in the order of cessions by Indian insurers," IRDA said in the exposure draft.

The earlier rules required risks to be placed with GIC Re and other registered reinsurance companies.

Reinsurance is insurance that is purchased by an insurance company from one or more other insurance companies as a means of risk management.

GIC is the sole national reinsurer providing reinsurance to the direct general insurance firms in India.