IRDAI releases obligatory cession for the financial year 2020-21

Feb 11, 2020 | by Avantis RegTech Legal Research Team


Industry Specific Compliance

The Insurance Regulatory and Development Authority of India (IRDAI) on February 03, 2020, in consultation with the Advisory Committee releases the Obligatory Cession for the financial year 2020- 21, applicable to Indian Re-insurers and other applicable insurers as per the provisions of Section 101A of the Insurance Act, 1938.

The percentage cession of the sum insured on each General Insurance Policy to be reinsured with the Indian Re-insurer shall be 5% (five percent) in respect of insurance attaching during the financial year beginning from April 01, 2020 to March 31, 2021. The entire Obligatory Cession is to be placed with General Insurance Corporation of India (GIC Re) only.

The followings are the terms and conditions to be followed:-

 There would be no limit on sum insured applicable for the cessions made during the period from April 01, 2020 to March 31, 2021.

 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 minimum percentage of commission on obligatory cession for different classes of business shall be 5% for Motor TP and Oil & Energy Insurance, 10% for Group Health Insurance, 7.50% for Crop Insurance, average terms for Aviation Insurance and 15% for all other classes of Insurance business.

 The Indian Re-insurer shall share the profit commission, on fifty-fifty basis, with the ceding insurer based on the performance and surplus of the total obligatory portfolio of the ceding insurer. No profit commission is payable if the loss ratio exceeds 78%. Profit commission shall not exceed 14%.

[Notification No. F. IRDAI/RI/1/167/2020]


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