Mumbai: The Insurance Regulatory and Development Authority of India (Irdai) will clear applications for new reinsurance companies next month, its chairman T.S. Vijayan said on Friday.
“About five-to-six companies have come and I think by January 2017 there should be some players in this market,” Vijayan said while addressing a global insurance summit organized by industry lobby Assocham.
“We will be taking a decision in October in the next authority meeting. Then they have to bring capital and start working at it,” he added.
Reinsurance is insurance bought by insurers for mitigating risk. At present, state-run GIC Re is the only domestic firm that provides reinsurance to insurance firms. Insurers can now purchase re-insurance from foreign firms such as Swiss Re and Munich Re, but this is costlier.
Allowing more firms to start India ops will increase competition and result in competitive pricing of products, ultimately leading to lower premium rates, said the head of a foreign reinsurance firm on condition of anonymity.
In May, Irdai had given the first level of clearance for at least three Indian firms for reinsurance, in addition to large global reinsurers such as Munich Re, Swiss Re, SCOR Re and Hannover Re. This is a preliminary nod and companies have to clear two more levels to start operations.
Then, Irdai had also granted clearance to another firm, the Reinsurance Group of America or RGA, which will likely be the first company in India to offer reinsurance in the life insurance space.
In 2015, following an amendment to the insurance law, foreign reinsurers were allowed to set up branch offices in the country. Later, an Irdai panel recommended allowing more reinsurers specifying eligibility criteria.