The Insurance Regulatory and Development Authority of India (IRDAI) on February 20, 2024, notified regarding the Obligatory Cession for the financial year 2024-25 after consultation with the Advisory Committee constituted under section 101B of the Insurance Act, 1938 and with the previous approval of the Central Government.
The following provisions have been stated:
• This notification will be applicable to Indian Re-insurers and other applicable insurers.
• The percentage cession of the sum insured on each General Insurance Policy to be reinsured with the Indian Re-insurer(s) shall be 4% (four per cent) in respect of insurance attaching during the financial year beginning from April 01, 2024, to March 31, 2025, 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 the General Insurance Corporation of India (GIC Re) only.
• Notice of information on cession:
o There would be no limit on the sum insured applicable for the cessions made during the period from April 01, 2024, to March 31, 2025.
o Given the above, the Indian Reinsurer 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 limit.
• The Indian Re-insurer shall share the profit commission, on a 50:50 basis, with the ceding insurer based on the performance and surplus of the total obligatory portfolio of the ceding insurer, after factoring in the following:
o Incurred loss % (to be worked at the end of 3 financial years).
o Management Expenses at 2%.
o Profit at 5%.
o Commission at 12.5%.
[Notification No. IRDAI/RI/3/197/2024]
