In
exercise of the powers conferred by section 114A of the Insurance
Act, 1938, sections 14 and 26 of the lnsurance Regulatory and
Development Authority Act, 1999, the Authority, in consultation with
the Insurance Advisory Committee, hereby makes the following
regulations, namely--
CHAPTER
I
PRELIMINARY
1.
Short title and commencement
(1)
These regulations may be called the Insurance Regulatory and
Development Authority (General Insurance-Reinsurance) Regulations,
2000.
(2)
They shall come into force on the date of their notification in the
Official Gazette.
2.
Definitions
In
these regulations, unless the context otherwise requires--
(a)
`Act' means the Insurance Regulatory and Development
Authority Act, 1999 (41 of 1999);
(b)
`Authority' means the Insurance Regulatory and Development
Authority established under sub-section (1) of section 3 of the Act;
(c)
‘cession' means the unit of insurance passed to a reinsurer
by the insurer which issued a policy to the original insured and,
accordingly, a cession may be the whole or a portion of single
risks, defined policies or defined divisions of business, as agreed
in the reinsurance contract;
(d)
`facultative' means the reinsurance of a part or all of a
single policy in which cession is negotiated separately and that the
reinsurer and the insurer have the option of accepting or declining
each individual submission;
(e)
`Indian reinsurer' means an insurer who carries on
exclusively reinsurance business and is approved in this behalf by
the Central Government;
(f)
`pool' means any joint underwriting operation of insurance or
reinsurance in which the participants assume a pre-determined and
fixed interest in all business written;
(g)
`retrocession' means the transaction whereby a reinsurer
cedes to another insurer or reinsurer all or part of the reinsurance
it has previously assumed;
(h)
`retention' means the amount which an insurer assumes for his
own account. In proportionate contracts, the retention may be a
percentage of the policy limit. In excess of loss contracts, the
retention is an amount of loss;
(i)
`treaty' means a reinsurance arrangement between the insurer
and the reinsurer, usually for one year or longer, which stipulates
the technical particulars and financial terms applicable to the
reinsurance of some class or classes of business;
(j)
words and expressions used and not defined in these
regulations but defined in the Insurance Act, 1938 (4 of 1938), or
the General Insurance Business Nationalisation Act, 1972 (57 of
1972), or Insurance Regulatory and Development Authority Act, 1999
(41 of 1999), rules made thereunder shall have the meanings
respectively assigned to them in those Acts or rules as the case may
be.
CHAPTER
II
3.
Procedure to be followed for reinsurance arrangements
(1)
The reinsurance programme shall continue to be guided by the
following objectives to--
(a)
maximise retention within the country;
(b)
develop adequate capacity;
(c)
secure the best possible protection for the reinsurance costs
incurred;
(d)
simplify the administration of business.
(2)
Every insurer shall maintain the maximum possible retention
commensurate with its financial strength and volume of business. The
Authority may require an insurer to justify its retention policy and
may give such directions as considered necessary in order to ensure
that the Indian insurer is not merely fronting for a foreign
insurer.
(3)
Every insurer shall cede such percentage of the sum assured on each
policy for different classes of insurance written in India to the
Indian reinsurer as may be specified by the Authority in accordance
with the provisions of Part IVA of the Insurance Act, 1938.
(4)
The reinsurance programme of every insurer shall commence from the
beginning of every financial year and every insurer shall submit to
the Authority, his reinsurance programmes for the forthcoming year,
45 days before the commencement of the financial year.
(5)
Within 30 days of the commencement of the financial year, every
insurer shall file with the Authority a photocopy of every
reinsurance treaty slip and excess of loss cover covernote in
respect of that year together with the list of reinsurers and their
shares in the reinsurance arrangement.
(6)
The Authority may call for further information or explanations in
respect of the reinsurance programme of an insurer and may issue
such direction, as it considers necessary.
(7)
Insurers shall place their reinsurance business outside India with
only those reinsurers who have over a period of the past five years
counting from the year preceding for which the business has to be
placed, enjoyed a rating of at least BBB (with Standard & Poor)
or equivalent rating of any other international rating agency.
Placements with other reinsurers shall require the approval of the
Authority. Insurers may also place reinsurances with Lloyd's
syndicates taking care to limit placements with individual
syndicates to such shares as are commensurate with the capacity of
the syndicate.
(8)
The Indian Reinsurer shall organise domestic pools for reinsurance
surpluses in fire, marine hull and other classes in consultation
with all insurers on basis, limits and terms which are fair to all
insurers and assist in maintaining the retention of business within
India as close to the level achieved for the year 1999-2000 as
possible. The arrangements so made shall be submitted to the
Authority within three months of these regulations coming into
force, for approval.
(9)
Surplus over and above the domestic reinsurance arrangements
class-wise can be placed by the insurer independently with any of
the reinsurers complying with sub-regulation (7) subject to a limit
of 10% of the total reinsurance premium ceded outside India being
placed with any one reinsurer. Where it is necessary in respect of
specialised insurance to cede a share exceeding such limit to any
particular reinsurer, the insurer may seek the specific approval of
the Authority giving reasons for such cession.
(10)
Every insurer shall offer an opportunity to other Indian insurers
including the Indian reinsurer to participate in its facultative and
treaty surpluses before placement of such cessions outside India.
(11)
The Indian reinsurer shall retrocede at least 50% of the obligatory
cessions received by it to the ceding insurers after protecting the
portfolio by suitable excess of loss covers. Such retrocession shall
be at original terms plus an over-riding commission to the Indian
reinsurer not exceeding 2.5%. The retrocession to each ceding
insurer shall be in proportion to its cessions to the Indian
reinsurer.
(12)
Every insurer shall be required to submit to the Authority
statistics relating to its reinsurance transactions in such forms as
the Authority may specify, together with its annual accounts.
4.
Inward reinsurance business
Every
insurer wanting to write inward reinsurance business shall have a
well defined underwriting policy for underwriting inward reinsurance
business. The insurer shall ensure that decisions on acceptance of
reinsurance business are made by persons with necessary knowledge
and experience. The insurer shall file with the Authority a note on
its underwriting policy stating the classes of business,
geographical scope, underwriting limits and profit objective. The
insurer shall also file any changes to the note as and when a change
in underwriting policy is made.
5.
Outstanding loss provisioning
(1)
Every insurer shall make outstanding claims provisions for every
reinsurance arrangement accepted on the basis of loss information
advices received from Brokers/Cedants and where such advices are not
received, on an actuarial estimation basis.
(2)
In addition, every insurer shall make an appropriate provision for
incurred but not reported (IBNR) claims on its reinsurance accepted
portfolio on actuarial estimation basis.
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