annual report 2009-10 - IRDA

4.3 Monitoring of ReinsuranceI.4.3.1 The mandate to the Authority in respect ofreinsurance lies in the provisions of Section 14(1) and14(2) Sub Section (f) of the IRDA Act, 1999 as well asSections 34F, 101A, 101B and 101C of the InsuranceAct, 1938. In addition, the Authority has framedregulations pertaining to reinsurance by non-lifeinsurers which lay down the ground rules for placingANNUAL REPORT 2009-1035reinsurance with the reinsurers. Under the provisionsof the Insurance Act, 1938, the General InsuranceCorporation of India has been designated as the“Indian Reinsurer” which entitles it to receive obligatorycessions of 10 per cent from all the direct non-lifeinsurers. The limits have been laid down inconsultation with the Reinsurance AdvisoryCommittee.TABLE 32NET RETAINED PREMIUM ON INDIAN BUSINESS AS PER CENT OF GROSSDIRECT PREMIUM (EXCLUDING GIC)(in per cent)Class 2009 –10 2008 – 09Public Private Public PrivateSector Sector Total Sector Sector TotalFire 70.35 30.81 56.84 71.80 32.64 57.48Marine Cargo 82.73 48.38 69.69 79.21 48.09 66.98Marine Others 12.93 9.00 12.18 14.87 5.62 12.45Motor 93.35 86.04 89.82 86.49 89.27 87.73Engineering 58.67 22.24 45.25 60.52 23.41 45.51Aviation 11.95 18.87 14.60 7.04 16.68 9.44Other Miscellaneous 88.16 72.08 79.97 90.07 74.44 82.61TOTAL 82.75 71.39 77.49 80.84 72.32 77.13I.4.3.2 Every insurer needs a comprehensive andefficient reinsurance programme in order to be ableto operate within the constraints of its financialstrength. This is important to maintain the solvencyof the insurer and to ensure that the clauses arehonoured. The Authority has stipulated that everyinsurer shall obtain the approval of its Board for itsreinsurance programme. The regulatory frameworkalso provides for filing of the reinsurance programmefor the next financial year with the Authority at least45 days before the commencement of the said year.The insurers are further required to file the treaty slipsor cover notes relating to the reinsurancearrangements with the Authority within 30 days of thecommencement of the financial year. These measureshighlight the importance attached to the existence ofadequate and efficient reinsurance arrangements foran insurance company. It would be recalled that thesolvency position of an insurance company isassessed on a “net of reinsurance” basis.TABLE 33REINSURANCE PLACED WITHIN INDIA AND OUTSIDE INDIA AS PER CENT OFGROSS DIRECT PREMIUM IN INDIA(in per cent)Class 2009 – 10 2008 – 09Placed Placed Placed Placedin India outside India in India outside IndiaFire 32.43 21.19 27.99 20.47Marine - Cargo 18.16 15.09 18.49 15.04Marine - Others 43.26 52.63 34.60 57.58Motor 28.78 0.11 28.07 0.27Aviation 42.17 53.17 43.73 50.70Engineering 43.33 23.06 44.38 18.77Miscellaneous – Others 15.26 6.00 13.42 5.07TOTAL 24.63 7.78 23.44 7.59