Foreign reinsurers can repatriate up to 20% of assigned capital: IRDAI

Insurance sector regulator Irdai has allowed foreign reinsurance branches, including Lloyd's India, to repatriate up to 20 per cent of the excess assigned capital to attract more players and allow free movement of capital.

As part of the ease of doing business in India, various committees deliberated on the repatriation of excess assigned capital by Foreign Reinsurance Branches (FRB) and Lloyd's India.

As per Irdai norms, the registration of branch offices of foreign reinsurers other than Lloyd's have 'assigned capital' and net owned funds (NOFs) as the capital requirements for setting up business in India.

The applicant's NOF should not be less than the prescribed amount of Rs 500 crore at any time and should infuse a minimum assigned capital of Rs 100 crore into the branch office.

After careful examination of the recommendations of the working groups, it is noted that to ensure sufficient reinsurance capacity in India and to attract more reinsurance players for offering reinsurance at a competitive price, the free movement of assigned capital for foreign reinsurance branches is required.

"Accordingly, it is decided that FRBs and Lloyd's India are permitted to repatriate excess assigned capital with prior approval of the Authority," the Insurance Regulatory and Development Authority of India (Irdai) said in a circular on Wednesday.

However, the relaxation comes with certain riders such as a minimum assigned capital of Rs 100 crore or a higher sum specified by Irdai at the time of grant of certificate of registration; submission of a request justifying the reasons for repatriation and a certificate stating foreign reinsurers' net owned funds of Rs 5,000 crore or as prescribed under the Insurance Act.

Among others, they should have a solvency ratio after the repatriation of at least 50 basis points higher than the control level of solvency i.E. 200 per cent and a certificate from certifying actuary about sufficient reserves to meet reinsurance liabilities.

"Such withdrawal shall not exceed 20 per cent of assigned capital of such FRB/ Lloyd's India as at the end of last financial year; and one request in a financial year can be made by the foreign reinsurer," Irdai said.

This circular shall come into force with immediate effect, the regulator said.

There are 10 Foreign Reinsurance Branches(FRBs) operating in India. This excludes Lloyd's India Reinsurance Branch, which also has a services company Markel Services India Pvt Ltd.

In 2020-21, the foreign reinsurers in India had a total premium of Rs 14,457 crore against Rs 12,682 crore in 2019-20. Their assigned capital increased to Rs 10,377 crore from Rs 8,667 crore.

Out of all the FRBs, including the syndicate of Lloyds in India, four branches reported a profit in 2020-21 while the remaining reported loss.
The total loss reported by all foreign reinsurance branches was Rs 209 crore in FY2020-21 against a loss of Rs 1,115 crore in 2019-20, according to Irdai data.

GIC Re is the national reinsurer, providing reinsurance to direct general and life insurance companies in India.