IRDAI issues percentage of cessation of the sum insured on each General Insurance Policy to be reinsured

Insurance Regulatory and Development Authority Of India (IRDAI) in exercise of the powers conferred by Sub-section (2) of the Section 101A of the Insurance Act, 1938, after consultation with the Advisory Committee has issued the percentage cession of the sum insured on each General Insurance Policy to be reinsured with the Indian Reinsurer(s) shall be 5% in respect of insurance attaching during the financial year beginning from April 01, 2017 to March 31, 2018.

Terms & Conditions for cessation are a under:-

·       Sum insured limits for cession:

i.             The following sum insured limits for obligatory cession shall be applicable from 1st April, 2017 to 30th September, 2017.

ii.           No sum insured limit shall be applicable for the cessions made during the period from 1st October, 2017 to 31st March, 2018.

iii.         In view of the above, the Indian Reinsurer(s) may require the ceding insurer to give immediate notice of underwriting information of any cession exceeding an amount specified by the former. The ceding insurer shall inform to the Indian Reinsurer(s) at all times whenever the cession exceeds such specified limits.

·       Percentage of commission on obligatory cession for different classes of business shall be as follows:

i.             Minimum 5% for Motor TP and Oil & Energy insurance.

ii.           Minimum 10% for Group Health insurance.

iii.         Average Terms for Aviation insurance.

iv.          Minimum 15% for all other classes of insurance business. Commission over and above, can be as mutually agreed between Indian Reinsurer(s) and the ceding insurer.

·       The Indian reinsurer(s) shall share the profit commission, on 50%:50% basis, with the ceding insurer based on the performance and surplus of the total obligatory portfolio of the ceding insurer, after factoring the following:

i.             Incurred loss % (to be worked at the end of 3 financial years).

ii.           Management Expenses at 2%.

iii.         Profit at 5%.

iv.          Commission at 15%.

v.            Loss ratio at 50% to 78%.

No profit commission is payable if the loss ratio exceeds 78%. Profit commission shall not exceed 14%.

[F. No IRDAI/RI/1/148/2018]