Download PDF - IRDA

ANNUAL REPORT 2011-12
14(2) Sub Section (f) of the IRDA Act, 1999 as well as
Sections 34F, 101A, 101B and 101C of the Insurance
Act, 1938. In addition, the Authority has framed
regulations pertaining to reinsurance for both life and
non-life insurers, which lay down the ground rules for
placing reinsurance.
I.4.3.2 Every insurer needs a comprehensive and
efficient reinsurance programme to enable it to operate
within the constraints of its fi nancial strength. This is
important to maintain the solvency of the insurer and
to ensure that the clauses are honoured as and when
they arise. Hence, the Authority has stipulated that
every insurer shall obtain the approval of its Board for
its reinsurance programme. The regulatory framework
also provides for fi ling of the reinsurance programme
for the next fi nancial year with the Authority at least 45
days before the commencement of the said year. The
insurers are further required to fi le the treaty slips or
cover notes relating to the reinsurance arrangements
with the Authority within 30 days of the commencement
of the fi nancial year. These measures highlight the
importance attached to the existence of adequate and
effi cient reinsurance arrangements for an insurance
company. It would be recalled that the solvency
position of an insurance company is assessed on a
“net of reinsurance” basis.
TABLE I.34
REINSURANCE CEDED OUTSIDE INDIA ON
INDIAN BUSINESS
(` crore)
Line of Business 2010-11 2011-12
Premium
Ceded
Net
Profit
Ceded
Premium
Ceded
Net
Profit
Ceded
Fire 976.82 210.72 1180.15 135.18
Marine Cargo 218.17 25.39 282.61 (39.10)
Marine Hull 579.35 (429.59) 499.95 358.04
Motor 15.97 18.30 40.46 14.93
Aviation 263.37 (101.05) 361.80 278.06
Engineering 403.87 121.71 447.90 184.33
Other Miscellaneous 1362.11 420.96 1201.71 (89.75)
TOTAL 3819.66 266.46 4014.59 841.69
Figure in brackets represent negative values.
I.4.3.3 The Regulations also require that every insurer
should maintain the maximum possible retention
commensurate with its fi nancial strength and volume
of business. The guiding principles in drawing up the
reinsurance programme have been stated as under:
Maximize retention within the country;
Develop adequate capacity;
Secure the best possible protection for the
reinsurance costs incurred; and
Simplify the administration of business.
I.4.3.4 With particular reference to the General
Insurance Corporation, the regulations require the
Indian reinsurer to organize domestic pools for
reinsurance surpluses in consultation with all insurers.
It would be recalled that the non-life insurers had come
together to form a pool for terrorism risks when the
international reinsurance markets withdrew cover after
the September 11 terrorist strikes in New York City in
the year 2001.
Net Retention
I.4.3.5 The net retention of the non-life insurers
increased to 91.84 per cent in 2011-12 as against 88.24
per cent in 2010-11. The retention ratio increased
across all the lines of business except the Aviation and
Marine Cargo sectors. The retention ratio for aviation
business fell sharply to 20.16 per cent in 2011-12 from
TABLE I.35
NET RETENTIONS* OF NON-LIFE INSURERS
Line of Business
Net Retentions
(In per cent)
2010-11 2011-12
Aviation 37.50 20.16
Engineering 70.15 73.53
Fire 65.39 75.16
Marine Cargo 79.18 78.86
Marine Hull 25.06 32.29
Miscellaneous 90.63 94.52
Motor 98.88 99.02
Industry 88.24 91.84
* Within the country
52