To,

all General Insurance Companies /
            General Insurance Corporation of India.


The Insurance Regulatory and Development Authority (General Insurance-Reinsurance) Regulations, 2000 stipulates inter alia as under:

Regulation 3(7):‘Insurers shall place their reinsurance business outside India with only those reinsurers who have over a period of the past five years counting from the year preceding for which the business has to be placed, enjoyed a rating of at least BBB(with Standard & Poor) or equivalent rating of any other international rating agency. Placements with other reinsurers shall require the approval of the Authority. Insurers may also place reinsurances with Lloyd’s syndicates taking care to limit placements with individual syndicates to such shares as are commensurate with the capacity of the syndicate’.

The above mentioned provision requires insurers to choose appropriate reinsurers abroad for placing their reinsurances. There is no limitation on use of Indian insurers or reinsurers for placement of reinsurance since they are regulated by IRDA.

It has come to the Authority’s notice that some insurers are agreeing to the insured choosing the reinsurers either directly or indirectly. The Authority reiterates that the contract of insurance is independent of the contract of reinsurance and the client is not a party to the contract of reinsurance. It is the function and responsibility of the insurance company to choose the appropriate reinsurer/s within the framework of the Regulations. The Authority will therefore not permit any insurer to dilute this function and responsibility by permitting the broker or the insured to specify conditions with regard to reinsurance placements or leaving the choice of the reinsurers directly or indirectly to the insured.

Non-compliance of the directives contained herein shall invite appropriate action of the Authority.

(C.S. Rao)
Chairman