Insurers Want Obligatory Cession to GIC RE Scrapped
1 May 2025 10:10 PM IST1 May 2025 10:10 PM IST
With commissions that non-life and health insurance companies earn on ceding a mandatory portion of their business to state owned reinsurer GIC RE (referred to as obligatory cession), insurers will soon be asking the government to further reduce the obligatory cession or do away with it.
GIC RE (Image:DC)
Mumbai: With commissions that non-life and health insurance companies earn on ceding a mandatory portion of their business to state owned reinsurer GIC RE (referred to as obligatory cession), insurers will soon be asking the government to further reduce the obligatory cession or do away with it. The Department of Financial Services secretary M Nagaraju has called a meeting with insurers on May 7 and non-life and pure health insurers would be presenting their case then.
Obligatory cession refers to a part of the business that Indian general insurance companies must mandatorily reinsure with the
national reinsurer--GIC Re which has been fixed at 4 per cent by the Insurance Regulatory and Development Authority of India (IRDAI) for 2025-2026. IRDAI has been reducing the obligatory cession over time from 20 per cent (several years ago) to 15 per cent, to 10 per cent and then to 5 per cent, and now to 4 per cent.
Says Rafi Ahmed, a former official of a public sector general insurer said that insurers earn very low commissions in the obligatory cession and so they do not want to pass the obligatory cession to GIC Re.
Explains Hari Radhakrishnan, regional director at First Policy Insurance Brokers, “The cessions were introduced during the
nationalised era when companies did not have much capacity and the Indian market was not well developed. The obligatory cessions helped to provide support from GIC. Now Indian companies are financially strong and they don’t need obligatory cessions as they have their own arrangements (with foreign reinsurers).”
national reinsurer--GIC Re which has been fixed at 4 per cent by the Insurance Regulatory and Development Authority of India (IRDAI) for 2025-2026. IRDAI has been reducing the obligatory cession over time from 20 per cent (several years ago) to 15 per cent, to 10 per cent and then to 5 per cent, and now to 4 per cent.
Says Rafi Ahmed, a former official of a public sector general insurer said that insurers earn very low commissions in the obligatory cession and so they do not want to pass the obligatory cession to GIC Re.
Explains Hari Radhakrishnan, regional director at First Policy Insurance Brokers, “The cessions were introduced during the
nationalised era when companies did not have much capacity and the Indian market was not well developed. The obligatory cessions helped to provide support from GIC. Now Indian companies are financially strong and they don’t need obligatory cessions as they have their own arrangements (with foreign reinsurers).”
( Source : Deccan Chronicle )
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