REINSURANCE IN INDIA Until GIC was notified as a National Reinsurer, it was operating as a holding / parent company of the 4 public

sector companies, controlling their reinsurance programmes. GIC would receive 20% obligatory cession of each policy written in India. Since deregulation, GIC has assumed the role of the markets only professional re-insurer. In order to focus on reinsurance, both in India and through its overseas offices and trading partners, GIC has divested itself of any direct business that it wrote prior to November 2000, with the temporary exception of crop insurance. It currently manages Hull Pool on behalf of the market, which receives a cession from writing companies and after a pool protection the business is retro-ceded back to the member companies. GIC also manages the Terrorism Pool. REINSURANCE REGULATION The placement of reinsurance business from tbe Indian market is now governed by Reinsurance Regulations formed by the IRDA. The objective of the regulation is to maximize the retention of premiums within

the country and to ensure that IRDA has issued the following instructions: Placement of 20% of each policy with National Re subject to a monetary limit for each risk for some classes Inter-company cession between four public sector companies. Indian Pool for Hull managed by GIC. The treaty and balance risk after automatic capacity are to be first offered to other insurance companies in the market before offering it to international re-insurers. Each company is free to arrange its own reinsurance program, which has to be submitted to the IRDA 45 days before commencement.13 Not more than 10% of reinsurance premium to be placed with one re-insurer. No re-insurer will have a rating of less than BBB from Standard and Poors or an

CHALLENGES FOR REINSURANCE MARKET Prior to nationalization in 1973, the reinsurance market in India had a much diluted presence in the industry. The foreign companies operating in India were managing their risk portfolio with their parent companies overseas. To safeguard the identified and limited risk of insurance companies, local companies created India Insurance Pool. The developments after nationalizations insurance industry created a new body with the merger of India Reinsurance and Indian Guarantee for its reinsurance business to support the technology and engineering mega projects. Some of the major issues in accounting have been undertaken considering the recent developments in the business. The return from foreign companies are to be incorporated when received upto 31st march and returns from indian

companies and state insurance funds received as of different dates are accepted upto the date of finalization of accounts. Arising out of the occurrence of disastrous like terrorist attack on world trade center etc. which brought about unprecendented loss of life and property and thereby unbearable liability and operational crisis onto the reinsurance industry world over. There is a wide difference between the rates required by the international reinsurers and those charged by the domestic insurers leading to the price affordability as an issue. Where there are tarrifs, like a case of India, the customers cushioned from the rate of increase in the international market. Such impositions are required to be self absorbed. The Indian market is in absence of the competitive environment of the international reinsurers at the local level, and has depended mainly on the domestic market understanding and basing probability of business ceded rather than on underwriting and risk information criteria. A regular interaction for regional co-operation has to be developed to set up a framework of the areas of co-operation and the mechanism, with this India has to compete with the global reinsurance giants. However, the tightening of reinsurance premium in India has been attributed to the low volumes. As market become global, country regulators face challenges in policy formulation for creating a market that develops and keeps confidence of the industry and for keeping international trade regulation intact. WHAT INDIA NEED TO DO? The opening up of the market as a whole and insurance sector in specific has created a potential for the Indian companies also to poolup bigger fund to support the capital intensive sectors. The market has to ensure that the domestic companies increase their own capacities and introduce more strict guidelines as first hand risk carriers. Insurance companies have to establish the business relations with their reinsurer to prevent them from worldwide reinsurance cycle that affects on capacity and stability. Worldwide the reinsurers are becoming strict on technical results of the insurance, therefore a disciplinary watch is required on insurance business as it is the base of reinsurance. The above problems or difficulties are not very new for a sector that is the transition. Since, some of the products are losing the importance (like proportional treaty), it is necessary to have sufficient premium income to maintain the balance and to bear unexpected losses. To have the best rates and terms from reinsures, the risk profile and exposure to catastrophe risk information transfer to reinsurer should be comprehensive and reliable. Due to the market opening through the WTO operation, there is net outflow expected in the premium from the developing countries as they have a low capitalization in most of the insurance companies. This could lead to weaken the objective of the serious efforts for the regional cooperation developments amongst the nations. The efforts towards developing a synergetic approach to model a successful cooperation will require to work on many areas simultaneously rather than organizing efforts only for one direction and loosing others, they are as follow: Pooling of financial resources Creating Investment opportunities Pooling of technical resources Joint ventures, alliance and partnership Research and developments Pooling of information Developing standard accounting system for business

GLOBAL POSITION Arising out of the occurrence of disastrous like Hurricance,terrorist attack on world trade center etc. which brought about unprecendented loss of life and property and

thereby unbearable liability and operational crisis onto the reinsurance industry world over. The huge amount of losses incurred, in the aforesaid events, forced the reisurers to hike the rates substantially and also change the terms and conditions of reinsurance arrangements. The law and regulations governing reinsurance operation in some of the advance and developing countries have seen few changes, making them more stringent in reinsurance acceptance and compulsory cessions to the local reinsurance companies. Top 20 Global P & C Reinsurers 2005 Rank 2004 Rank Group GPW US $ mn Market Share(%) 1 1 Munich Re 17400 12 2 2 Swiss Re 16046 11 3 3 Berkshire Harthway 8039 5 4 5 Lyoyds 7953 5 5 4 Hannover Re 6569 4 6 6 GE Insurance Solutions 4469 3 7 8 Transatlantic Holdings 4141 3 8 11 Partner Re 3471 2 9 10 Xl Capital 3421 2 10 9 Everest Re 3411 2 11 7 Converium 3395 2 12 12 ACE 2960 2 13 13 SCOR 2060 1 14 15 Odyssey Re 1954 1 15 14 White mountains Re 1933 1 16 17 Korean Re 1907 1 17 23 Platinum Underwriters 1660 1 18 18 Arch 1657 1 19 16 AXA Re 1571 1 20 19 QBE Re 1480 1 Source : Benfield industry Analysis and Research CONCLUSION Reinsurance mean insuring again. It is transfer of insurance risk from one insurer to another. Under reinsurance the original insurer who has insured a risk, insures a part of that risk with another insurer. Reinsurance premium is an income to the reinsurer and an expense to the insurer. Reinsurance is a good method to diversify and distribute risks of an insurer. Reinsurance even provide technical assistance and rating assistance to the original insurers. Reinsurance is also a contract of indemnity. The object of underwriting is to make a reasonable profit, it is equally essential that the business ceded to reinsurers should also give them a margin. For profit, therefore, the overall quality of business accepted by direct insurers should be good. Today, the environment is more like a business than a gentlemen's club. You have more players, more deals, and contracts can vary greatly between reinsurers. Disputes are no longer resolved by a handshake. They are more frequent and more difficult CHALLENGES FOR REINSURANCE MARKET Prior to nationalization in 1973, the reinsurance market in India had a muchdiluted presence in the industry. The foreign companies operating in India weremanaging their risk portfolio with their parent companies overseas. To safeguardthe identified and limited risk of insurance companies, local companies createdIndia Insurance Pool. The developments after nationalizations insurance industry created a new bodywith the merger of India Reinsurance and Indian Guarantee for its reinsurancebusiness to support the technology and engineering mega projects. Some of the major issues in accounting have been undertaken considering therecent developments in the business. The return from foreign companies are tobe incorporated when received upto 31st march and returns from indiancompanies and state insurance funds received as of different dates are acceptedupto the date of finalization of accounts. Arising out of the occurrence of disastrous like terrorist attack on world tradecenter etc. which brought about unprecendented loss of life and property andthereby unbearable liability and operational crisis onto the reinsurance industryworld over.

There is a wide difference between the rates required by the internationalreinsurers and those charged by the domestic insurers leading to the priceaffordability as an issue. Where there are tarrifs, like a case of India, thecustomers cushioned from the rate of increase in the international market. Suchimpositions are required to be self absorbed. The Indian market is in absence of the competitive environment of theinternational reinsurers at the local level, and has depended mainly on thedomestic market understanding and basing probability of business ceded ratherthan on underwriting and risk information criteria. A regular interaction for regional co-operation has to be developed to set up aframework of the areas of co-operation and the mechanism, with this India has tocompete with the global reinsurance giants. However, the tightening ofreinsurance premium in India has been attributed to the low volumes. As marketbecome global, country regulators face challenges in policy formulation forcreating a market that develops and keeps confidence of the industry and forkeeping international trade regulation intact. WHAT INDIA NEED TO DO? The opening up of the market as a whole and insurance sector in specific hascreated a potential for the Indian companies also to poolup bigger fund tosupport the capital intensive sectors. The market has to ensure that the domesticcompanies increase their own capacities and introduce more strict guidelines asfirst hand risk carriers. Insurance companies have to establish the businessrelations with their reinsurer to prevent them from worldwide reinsurance cyclethat affects on capacity and stability. Worldwide the reinsurers are becoming strict on technical results of theinsurance, therefore a disciplinary watch is required on insurance business as itis the base of reinsurance. The above problems or difficulties are not very newfor a sector that is the transition. Since, some of the products are losing the importance (like proportional treaty), itis necessary to have sufficient premium income to maintain the balance and tobear unexpected losses. To have the best rates and terms from reinsures, therisk profile and exposure to catastrophe risk information transfer to reinsurershould be comprehensive and reliable. Due to the market opening through the WTO operation, there is net outflowexpected in the premium from the developing countries as they have a lowcapitalization in most of the insurance companies. This could lead to weaken theobjective of the serious efforts for the regional cooperation developmentsamongst the nations. The efforts towards developing a synergetic approach to model a successfulcooperation will require to work on many areas simultaneously rather thanorganizing efforts only for one direction and loosing others, they are as follow: Pooling of financial resources Creating Investment opportunities Pooling of technical resources Joint ventures, alliance and partnership Research and developments Pooling of information

Developing standard accounting system for business

GLOBAL POSITION Arising out of the occurrence of disastrous like Hurricance,terrorist attack onworld trade center etc. which brought about unprecendented loss of life andproperty and thereby unbearable liability and operational crisis onto thereinsurance industry world over. The huge amount of losses incurred, in theaforesaid events, forced the reisurers to hike the rates substantially and alsochange the terms and conditions of reinsurance arrangements. The law andregulations governing reinsurance operation in some of the advance anddeveloping countries have seen few changes, making them more stringent inreinsurance acceptance and compulsory cessions to the local reinsurancecompanies. Top 20 Global P & C Reinsurers 2005 Rank 2004 Rank

Group GPW US $ mn Market Share(%) 1 1 Munich Re 17400 12 2 2 Swiss Re 16046 11 3 3 Berkshire Harthway 8039 5 4 5 Lyoyds 7953 5 5 4 Hannover Re 6569 4 6 6 GE Insurance Solutions 4469 3 7 8 Transatlantic Holdings 4141 3 8 11 Partner Re 3471 2 9 10 Xl Capital 3421

2 10 9 Everest Re 3411 2 11 7 Converium 3395 2 12 12 ACE 2960 2 13 13 SCOR 2060 1 14 15 Odyssey Re 1954 1 15 14 White mountains Re 1933 1 16 17 Korean Re 1907 1 17 23 Platinum Underwriters 1660 1 18 18 Arch 1657 1 19 16 AXA Re

1571 1 20 19 QBE Re 1480 1 Source : Benfield industry Analysis and Research CONCLUSION Reinsurance mean insuring again. It is transfer of insurance risk from one insurerto another. Under reinsurance the original insurer who has insured a risk, insuresa part of that risk with another insurer. Reinsurance premium is an income to thereinsurer and an expense to the insurer. Reinsurance is a good method todiversify and distribute risks of an insurer. Reinsurance even provide technicalassistance and rating assistance to the original insurers. Reinsurance is also acontract of indemnity. The object of underwriting is to make a reasonable profit, itis equally essential that the business ceded to reinsurers should also give them amargin. For profit, therefore, the overall quality of business accepted by directinsurers should be good. Today, the environment is more like a business than a gentlemen's club. Youhave more players, more deals, and contracts can vary greatly betweenreinsurers. Disputes are no longer resolved by a handshake. They are morefrequent and more difficult to resolve. to resolve.equivalent rating from AM Best.