Indian Reinsurance Regulations to Affect Life Insurance Business

Friday, May 30, 2014
Print Print Email Email

CHENNAI: The new reinsurance regulations issued by the Indian insurance regulator will affect smaller life insurers and not the bigger companies but will surely affect reinsurers, industry experts feel. The Insurance Regulatory and Development Authority (IRDA) came out last year with its new reinsurance regulations. Simply put, reinsurance is a contract whereby a primary insurer passes on part of his risk to another insurer called the reinsurer.

"Larger life insurers may not be affected by the new reinsurance regulations. But for smaller companies it will be an issue. After the new regulations all the risk will be on the life insurer's books," Sandeep Batra, executive director of ICICI Prudential Life Insurance Company Ltd, told reporters. A life insurance industry expert, who did not want to be named, however told IANS that the full impact of the regulations would be known only this fiscal as the new product approval process ended only in March 2014.

According to industry officials, as per the new regulations, a life insurer has to decide on risk retention limit based on the value of a policy and not on the total value of life insurance an individual has taken. "Globally the practice is to decide on the risk retention based on a life - the total value of a life insurance policy a person has taken - and not the on the individual policy size. Whereas under the new regulations the risk retention limit is to decided by an insurer based on the individual policy size," consulting actuary R.Ramakrishnan told IANS.

Elaborating he said: "For instance a company decides to reinsure policies with sum assured of over Rs.10 lakh. Suppose an individual takes 10 different policies of Rs.10 lakh each. As per the new regulation, the life insurer has to bear the entire risk of Rs.1 crore by itself. Fuming at the new regulations, another senior industry official told IANS: "The risk retention limit is decided based on a company's risk management principles. The IRDA regulation is prescriptive and not principle based."

READ MORE: EPFO Panel Grants Tax Exemption to 20 Private PF Trusts

5 Questions Every First Time Credit Card Buyer Should Ask

Source: IANS
Looking For Loan? Let us Help you !!!
Loan Amount
Annual Income
Preferred banks
Type the characters you see in the picture
Banks need to raise own capital
Public Sector Banks (PSBs) may raise capital themselves to meet regulatory and growth ..
Bharti Airtel board approves
Telecom major Bharti Airtel on Thursday said its board of directors has approved fund raising ..
Brookfield to buy RIL E-W Pipeline
Canadian investor Brookfield has acquired the loss-making East-West Pipeline Ltd from Mukesh Amba..
90% of developing economies
Ninety per cent of developing economies, including India are falling behind or are at risk of fall..