IRDAI issues notification regarding Obligatory Cession for the financial year 2019-20

Apr 09, 2019 | by Avantis RegTech Legal Research Team


The Insurance Regulatory Authority of India (IRDAI) on April 04, 2019, with the previous approval of the Central Government, has issued a Notification regarding “Obligatory Cession for the financial year 2019-20”.

Applicability: This notification will be applicable to Indian Re-insurers and other applicable insurers as per the provisions of Section 101A of the Insurance Act, 1938, which specifies the provisions regarding Re-insurance with Indian reinsurers.

Percentage of Cession: The percentage cession of the sum insured on each General Insurance Policy to be reinsured with the Indian Re-insurer(s) shall be 5% (five percent) in respect of insurance attaching during the financial year beginning from April 01, 2019 to March 31, 2020, except the terrorism premium and premium ceded to Nuclear pool, wherein it would be made ‘NIL’. The entire Obligatory Cession is to be placed with General Insurance Corporation of India (GIC Re) only.  

Terms & Conditions

i.Notice of information on cession:

The Indian Re-insurer may require the ceding insurer to give immediate notice of underwriting information of any cession exceeding an amount as specified by the former. The ceding insurer shall inform the Indian Re-insurer at all times whenever the cession exceeds such specified limits.

ii.Commission:

Certain percentage of commission on obligatory cession will also be given for different classes of business.

iii.Profit Commission:

The Indian Re-insurer 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 certain issues.

[Notification No. IRDAI/RI/3/154/2019]

Click here to download the Notification.


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