REGD. NO. D. L.-33004/99

The Gazette Of India 

EXTRAORDINARY

PART III—Section 4

PUBLISHED BY AUTHORITY

NEW DELHI, WEDNESDAY, JANUARY 17, 2018/PAUSHA 27, 1939

INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA

NOTIFICATION

Hyderabad, the 9th January, 2018

F. No IRDAI/RI/1/148/2018.—In exercise of the powers conferred by Sub-section (2) of the Section 101A of the Insurance Act, 1938, the Authority, after consultation with the Advisory Committee, constituted under section 101B of the Insurance Act, 1938 and with the previous approval of the Central Government, hereby makes the following notification namely: – “Obligatory Cession”

1. Applicability: This notification shall be applicable to Indian Re insurers and other applicable insurers as per the provision of Section 101A of Insurance Act, 1938.

2. Percentage of Cession: The percentage cession of the sum insured on each General Insurance Policy to be re insured with the Indian Re insurer(s) shall be 5% in respect of insurance attaching during the financial year beginning from 1st April, 2017 to 31st March, 2018. Apportionment of obligatory cession for the FY 2017-18 will be at 5% and 0% between General Insurance Corporation of India and ITI Reinsurance Ltd. respectively.

3. Terms & Conditions:

a) Sum insured limits for cession:

i. The following sum insured limits for obligatory cession shall be applicable from 1st April, 2017 to 30th September, 2017.

Class Limit of cession in sum insured
Fire, IAR Large Risks Rs 750 crore sum insured (MD+LOP) per risk
Marine Cargo/ DSU Insurance Rs 50 crore sum insured per policy/bottom/sending
Marine Hull Rs 50 crore sum insured per vessel
War & SRCC Rs 50 crore sum insured per vessel
All Liability products excluding financial liability Rs 25 crore per policy including USA and Rs 50 crore per policy excluding USA
Financial, Credit and Guarantee Lines, mortgage insurance, special contingency policies etc. Rs 50 crore sum insured per policy
Machinery Breakdown, Boiler Explosion and related loss of profit Rs 100 crore per risk
Contractor’s All Risks, Erection All Risks, Advance Loss of Profit, DSU Insurance Rs 500 crore per risk (MD+LOP)
Oil & Energy Rs 50 crore SI per risk
Others No Limit

ii. No sum insured limit shall be applicable for the cessions made during the period from 1st October, 2017 to 31st March, 2018.

iii. In view of the above, the Indian Re insurer(s) may require the ceding insurer to give immediate notice of underwriting information of any cession exceeding an amount specified by the former. The ceding insurer shall inform to the Indian Re insurer(s) at all times whenever the cession exceeds such specified limits.

b) Commission:

Percentage of commission on obligatory cession for different classes of business shall be as follows:

i. Minimum 5% for Motor TP and Oil & Energy insurance.

ii. Minimum 10% for Group Health insurance.

iii. Average Terms for Aviation insurance.

iv. Minimum 15% for all other classes of insurance business.

Commission over and above, can be as mutually agreed between Indian Reinsurer(s) and the ceding insurer.

c) Profit Commission:

The Indian re insurer(s) shall share the profit commission, on 50%:50% basis, with the ceding insurer based on the performance and surplus of the total obligatory portfolio of the ceding insurer, after factoring the following:

i. Incurred loss % (to be worked at the end of 3 financial years).

ii. Management Expenses at 2%.

iii. Profit at 5%.

iv. Commission at 15%.

v. Loss ratio at 50% to 78%.

No profit commission is payable if the loss ratio exceeds 78%. Profit commission shall not exceed 14%.

T. S. VIJAYAN, Chairman

[ADVT. III/4/Exty./390/17]

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