Insurance Regulatory and Development Authority of India (IRDAI) has issued a notification setting the obligatory reinsurance cession for the financial year 2025-26. As per the mandate, Indian general insurers must cede 4% of the sum insured from each policy to Indian Re-insurer(s), with the entire obligatory cession placed solely with the General Insurance Corporation of India (GIC Re). Exceptions include terrorism premiums and premiums ceded to the Nuclear Pool, which are exempt from this requirement.
There is no cap on the sum insured for cessions during this period, but insurers must notify the Indian Re-insurer if cession exceeds specified limits. The notification also sets minimum commission rates: 5% for Motor TP and Oil & Energy insurance, 10% for Group Health insurance, 7.5% for Crop Insurance, and 15% for other classes of insurance. Aviation insurance commissions will follow average terms. Additional commission rates may be negotiated between insurers and the Indian Re-insurer.
The profit commission will be shared equally (50:50) between the Indian Re-insurer and the ceding insurer based on portfolio performance, factoring in incurred losses, management expenses (2%), profit (5%), and a standard commission of 12.5%. The new regulation, issued under Section 101A of the Insurance Act, 1938, will be in effect from April 1, 2025, to March 31, 2026.
INSURANCE REGULATORY AND DEVELOPMENT AUTHORITY OF INDIA
NOTIFICATION
Hyderabad, the 24th February, 2025
F. No IRDAI/RI/6/213/2025.— In exercise of the powers conferred by Sub-section (2) and (4) 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 for the financial year 2025-26”.
I. Applicability: This notification shall be applicable to Indian Re-insurers and other applicable insurers as per the provisions of Section 101A of the Insurance Act, 1938.
2. Percentage of Cession: The percentage cession of the sum insured on each General Insurance Policy to be reinsured with the Indian Re-insurer(s) shall be 4% (four percent) in respect of insurance attaching during the financial year beginning from 1st April, 2025 to 31st March, 2026, except the terrorism premium and premium ceded to Nuclear pool wherein it would be made ‘NIL’. The entire Obligatory Cession is to be placed with General Insurance Corporation of India (GIC Re) only.
3 .Terms & Conditions:
a) Notice of information on cession:
i. There would be no limit on sum insured applicable for the cessions made during the period from 1st April 2025 to 31st March, 2026.
ii. In view of the above, the Indian Re-insurer may require the ceding insurer to give immediate notice of underwriting information of any cession exceeding an amount as specified by the former. The ceding insurer shall inform the Indian Re-insurer 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. Minimum 7.50% for Crop Insurance.
iv. Average Terms for Aviation insurance.
v. Minimum 15% for all other classes of insurance business.
Commission over and above, can be as mutually agreed between Indian Re-insurer(s) and the ceding insurer.
c) Profit Commission:
The Indian Re-insurer 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 12.5%.
DEBASISH PANDA, Chairperson
[ADVT.-III/4/Exty./997/2024-25]
