Kathmandu. Insurance Regulatory and Development Authority of India (IRDAI) State-owned Indian reinsurance company GIC Has retained a mandatory 4 per cent session in favour of Re for 25.
Four non-life insurance companies in the public sector will benefit from this arrangement if the private sector insurance companies do not like this decision of the regulator. Private sector insurance companies have expressed concern over the impact on GIC Rico’s operational flexibility and profitability.
When the Indian insurance market was liberalised in the early 1990s, this system of compulsory discounts began. It has continued since then. The session amount has been gradually reduced from 20 per cent to 15 per cent, 10 per cent and 5 per cent to 4 per cent now.
In the case of GIC re, session means part of the insurance premium that the insurer has to pay to the reinsurer. Incidentally, in 2022, an IRDAI-appointed committee had recommended removing the mandatory session rate for non-life insurers to transfer to state-controlled reinsurance company GIC Re to zero instead of the current 4 per cent.
Indian non-life insurance companies and foreign reinsurance companies, which have established branches in India, have always demanded the complete removal of GIC renewal session exemption to create a level playing field in the Indian reinsurance market.
Chief Executive Officers (CEOs) of major non-life and health insurance companies are scheduled to meet M Nagaraju, Secretary, Department of Financial Services, Ministry of Finance, Government of India on May 7. Nagaraju is expected to reconsider the regulator’s need to maintain the mandatory session 4 per cent market capitalisation of GIC Re.
In 2024, the collection of GIC Re from mandatory concessions was about Rs 15 billion. Compulsory exemptions have always been a contentious issue in India. Private insurers argue that this limits their ability to do reinsurance business with other reinsurance providers and reduces their commission income.
