Bring capital for final licence: IRDA to five global players

More are likely to join the domestic reinsurance market as Lloyd’s of London and Gen Re, part of Berkshire Hathaway of Warren Buffet have also applied for R1 licence. The entry of these global giants is expected to make India a financial hub in South and Middle East Asia after Singapore and Hong Kong.

“The IRDA has now asked these companies to bring in the capital to receive the final licence,” said an insurance sector official. “Each of these players have to infuse Rs 500 crore and would complete the compliance within a month. These players are now targetting to begin their full fledged operations by April 1 when the most of the renewals in the general insurance in India are done.”

The IRDA had already approved the initial R1 licence to five reinsurers. Another UK based player XL Catlin which has also received the R1 clearance is awaiting final directions from the IRDA. ITI Reinsurance is promoted by a firm controlled by Sun Pharma co-promoter Sudhir Valia in March. State-owned GIC Re has been the country’s sole reinsurance company so far and size of the market is around $2.5 billion. Munich Re is the largest reinsurance player in the world while Swiss Re is the second largest and Hannover comes third in global size.

After the IRDA had announced its reinsurance regulations in November 2015, seven global reinsurers, which have been doing their business offshore, had applied for the licence to set up branch operations in India. While normal insurers need three stages of clearances, reinsurers have to get only two levels of approvals. “We don’t see any threat. There’s ample room for anyone — both domestic and foreign — in India. Growth is in this part of the world and we are an established reinsurer,” said an official of an Indian insurance company. GIC which gets 45 per cent of its premium from the overseas business is planning to push up the overseas share to 50 per cent. GIC also gets 5 per cent compulsory reinsurance deals in India and it would be worth watching whether IRDAI would allow such arrangement as the market has more players.

Inga Beale, CEO, Lloyd’s of London recently said, “Lloyd’s and the London insurance market can play a real role in supporting India’s strong economic growth. Our proposed onshore branch will provide Indian reinsurance brokers with local access to Lloyd’s unmatched underwriting expertise and innovative reinsurance solutions for complex and specialist risks, including agriculture, infrastructure and disaster management.’’

IRDA has set a minimum capital requirement of Rs 100 crore for allowing new reinsurers to set up operations in the country. Issuing the final norms earlier, the IRDA has made provision for two categories of reinsurers who will be allowed to open office in the country. Under Category I (those with the order of preference of cessions at par with the Indian reinsurer like GIC Re), a branch office has to maintain a minimum retention of 50 per cent of the Indian reinsurance business. The regulator has come out with separate set of guidelines for Lloyd’s. “It will set up Lloyd’s India, which will be granted certificate of registration to establish a market and associated structures for conduct of reinsurance business in India and outside India in the manner set out in the regulations,’’ Irda said. The constituents of Lloyd’s India will include members of Lloyd’s, formed collectively as syndicates who delegate authority to service companies, located within Lloyd’s India.