IRDA passes credit rating norm for choosing foreign reinsurers

Insurance Regulatory and Development Authority (IRDA).
As per the IRDA (General Insurance – Reinsurance) Regulations 2013, Foreign reinsurers who have a credit rating of at least BBB from Standard & Poor’s Corp. or an equivalent rating by any other international agency for the past five years, can reinsure Indian insurers.
In the reinsurance framework, multiple insurance companies share the risk by purchasing insurance policies from other insurers in order to limit the total loss the original insurer would face in the case of a disaster.
 
What are the Objectives of this move by IRDA ?

• Increase retention (the portion of risk which an insurer assumes for its own account).
• IRDA was finding it difficult to track the audit trail of many transactions with regard to reinsurance placements and coinsurance.
• There was a demand from the general insurers that a level playing field be created for foreign insurance companies and Indian reinsurers. This was because, as yet there have been no restrictions in place for the foreign firms.

Month: Current Affairs - April, 2013