IRDA plans reinsurance overhaul with new norms

HYDERABAD: The Insurance Regulatory Development Authority (IRDA) is now set to overhaul the reinsurance industry by putting in place new guidelines, mainly to strengthen and increase the transparency rate in the norms, according to J Hari Narayan, chairman of IRDA. These guidelines would be out by the end of this year.

"Reinsurance is a priority for IRDA as there are various aspects that need to be improved upon here. A committee is already formed to look into issues related to reinsurance," he added. Typically, in reinsurance, an insurance company transfers a part of its risks to another reinsurer, and remains responsible for the policyholder's benefits and claims.

Such a practice allows the insurance company to reduce losses due to claims. In fact, the insurance regulator had last week release a draft regulation on electronic transaction and settlement system regulations. The draft had made provisions for setting up of a service company to create electronic transaction administration and settlement system between reinsurers, insurers and brokers, which would be tracked by IRDA. Owing to differences in transactions between the companies, the regulator had noticed high inter-company balances.

Mr Hari Narayan was here to address the convocation of the Institute of Insurance and Risk Management, set up by the regulator and the Andhra government. He also added that the IPO guidelines would be out shortly and the regulator was waiting to hear from SEBI. Currently, the Insurance Act restricts the FDI investments to 26% and also says an insurance company can opt for an IPO only after 10 years of operations.