Banking Project

Reinsurance in India
CHAPTER 1
INTRODUCTION
WHAT IS REINSURANCE?
Reinsurance is a transaction whereby one insurance company (the “reinsurer”) agrees to indemnify another
insurance company (the “reinsured, “cedent” or “primary” company) against all or part of the loss that the latter
sustains under a policy or policies that it has issued. For this service, the ceding company pays the reinsurer a
premium.
The purpose of reinsurance is the same as that of insurance: to spread risk. Reinsurance helps protect insurers
against unforeseen or extraordinary losses by allowing them to spread their risks. For example, a catastrophic
fire at an industrial enterprise could financially devastate its insurer. With reinsurance, no single insurer finds
itself saddled with a financial burden beyond its ability to pay.
Definition
Reinsurance is a financial transaction by which risk is transferred (ceded) from an insurance company (cedant)
to a reinsurance company (reinsurer) in exchange of a payment (reinsurance premium). Providers of
reinsurance are professional reinsurers which are entities exclusively dedicated to the activity of reinsurance.
Also, in most jurisdictions insurance companies can participate in reinsurance. The terms of a reinsurance
transaction are defined in a reinsurance treaty. Due to the complexity of reinsurance treaties it is not uncommon
that the definitive treaties are only signed months after the risk transfer took place. To document the acceptance
of the risk, a short version of a treaty calls a slip containing the most important terms of the agreement is used
instead. Slips are signed before the risk is transferred and accepted by the reinsurer. Some jurisdictions are
requiring signed treaties before the risk is transferred.
Reinsurance is to be differentiated from coinsurance, where the risk is shared and not transferred among
several insurance companies, each one of them having a direct contractual relationship with the insured for the
portion of the risk accepted by that company. Thus, reinsurance always involves legal entities and not
individuals. In reinsurance, the contractual relationship is between the cedant and the reinsurer. Only in special
situations does the reinsurance treaty have a provision called the cut through clause that allows the insured to
have a direct legal claim to the reinsurer; for example, in case the insurer becomes insolvent.
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Reinsurers can also transfer risks to other entities called retrocession Aires by means of a financial transaction
like reinsurance called retrocession. Professional retrocession Aires are expected to keep and not to transfer the
assumed risk to other entities. In this manner reinsurers and insurers that do accept risks not individually
identified can be sure that they will never assume part of the risk they had already transferred. However, there
have been situations in the past where retrocession Aires transferred further the assumed risks resulting in
unexpected over retention for the retrocedent. Proper retrocession treaty wording can help here.
ORIGIN AND DEVELOPMENT OF REINSURANCE: -

In the years 1871 to 1873, no less than twelve independent reinsurance institutions were founded in Germany,
of which very few survive today. The pressure of competition led to unwholesome practices, and soon many
of these newly formed companies found themselves in dire straits. In branches of insurance, other than fire
insurance, we find no definite tendency in the '70's toward the establishment of separate reinsurance facilities
in Germany. Ernst Albert Masius, in his "Rundschau" in 1846, deplored the lack of reinsurance facilities in
hail insurance. Even now, this branch of the business lacks adequate reinsurance service. Fundamentals in the
most widely accepted sense, reinsurance is understood to be that practice where an original insurer, for a
definite premium, contracts with another insurer (or insurers) to carry a part or the whole of a risk assumed
by the original insurer. By insurers we mean all persons, partnerships, corporations, associations, and
societies, associations operating as Lloyd's, inter-insurers or individual underwriters authorized by law to
make contracts of insurance. We may define insurance as an agreement by which one party, for a
consideration, promises to pay money or its equivalent, or to do an act valuable to the insured, upon the
happening of a certain event or upon the destruction, loss or injury of something in which the other party has
an interest. The insurance business is the business of making and administering contracts of insurance.
Insurance contracts are of two types those which engage merely to pay a sum of money on the happening of
an event, or merely to begin a series of payments on or after the happening of a certain event, are contracts of
investment. Contracts of insurance which engage to pay money or its equivalent, or the doing of acts valuable
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to the insured, upon destruction, loss or injury involving things, are contracts of indemnity. And so,
reinsurance may be second insurance of
(a)Contracts of investment and/or
(b) Contracts of indemnity.
There may exist, therefore, two types of insurance business, depending upon which of these two organic
contracts the business engages to administer.
THE FIRST INDEPENDENT REINSURANCE COMPANY; -

In 1846, the first independent reinsurance company was founded in Germany, the Cologne Reinsurance
Company. This was the idea of Mevissen. He held that an independent reinsurance company would be no
competitor of the direct-writing companies and that it was certain to be welcomed by and to receive a good
volume of business from those companies. Mevissen's idea of 1846 did not mature, however. For various
reasons the company did not begin business until 1852, and then only with the assistance of considerable
French capital. This marked the establishment of reinsurance as a specific, independent branch of the business.
Out of small beginnings, this company began to prosper, and its example began to attract other enterprising
persons.
During the first three years of its business life the Cologne Reinsurance Company extended its operations in
Germany, Austria, Switzerland, Belgium, Holland and France, and then tried to arrange treaty contracts with
English companies. It seems that domestic English reinsurance business, at that time, was quite unprofitable
to the reinsures and the Manager of the Cologne was obliged to keep out Of the English market. On June 24,
1853, a fire treaty was concluded between the Aachen and Munchener Fire Insurance Company and its
subsidiary, the Aachener Reinsurance Company. This was an early example of a true "first surplus" treaty
under which the reinsurer was allotted one-tenth of every surplus risk, with certain modifications in respect
to various classes of risk enumerated in the contract. It is interesting to note that the Aachen - Munchener
Company had an earlier arrangement with L' Urbaine, Paris.
FIRST RECORDED REINSURANCE CONTRACT: -

The first reinsurance contract on record relates to the year 1370, when an underwriter named Guilano Grillo
contracted with Goffredo Benaira and Martino Saceo to reinsure a ship on part of the voyage from Genoa to
the harbor of Bruges.
As early as the twelfth century, marine insurance began to be transacted through the so-called "Chambers or
Exchanges of Insurance," which had for their object, first, the promotion of the marine insurance business on
a solid basis and, second, the settling of disputes arising among merchants and others concerned in bottomry
and respondentia contracts. In later years, these Chambers or Exchanges of Insurance became corporate
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bodies and instead of remaining confined to the original function of regulating and registering insurance made
by others, undertook an insurance business themselves. With the establishment and functioning of Lloyd's in
1710, there was a marked decline in the transaction of insurance business through these Chambers or
Exchanges. There is a suggestion of reinsurance practice in the "Antwerp Customs" of 1609. Some mention
of reinsurance practice is to be found also in the "Guidon de la Mer," a code of sea laws in use in France from
a very early date. These marine regulations were consolidated and published at Bordeaux in 1647 and at
Rouen in 1671. The author of the consolidations was said to have been Cleirac. With the shift of centres of
commerce from the south, southwest and west of Europe to the north, England's foreign trade grew. Marine
insurance followed in its wake. Some underwriters found they could affect reinsurance with others.
Underwriters were accustomed to assign parts of risks to others at lower rates, and these reinsures had hopes
of finding other persons who would take parts of these risks at still lower rates. This traffic in premium
differences was so greatly abused that in 1746 it was forbidden. (19 Geo. II, c 37, Section 4). Under this
statute, reinsurance was permitted only if the party whose risk was reinsured was insolvent, bankrupt or in
debt and if the transaction was expressed in the policy to be a reinsurance. The statute was of a dead letter
and was repealed by 27 and 28 Vict.c 56, Section I on July 25, 1864
OBJECTIVES OF REINSURANCE: -
Insurer purchases reinsurance for essentially four reasons:
1) To limit liabilities on specific risks

2) To stabilize loss expanses
3) To protect against catastrophes; and
4) To increase capacity.
Different types of reinsurance contract are available in the market commensurate with the ceding
company’s goals.
1. Limiting liability:
By providing a mechanism in which companies limit loss exposure to levels commensurate with net asset,
reinsurance companies allow insurance companies to offer coverage limits considerably higher than they
could otherwise provide. This function of reinsurance is crucial because they allow all companies, large and
small, to offer coverage limits to meet their policyholders’ needs. In this manner, reinsurance provides an
avenue for small-to-medium size companies to compete with industry giants. In calculating an appropriate
level of reinsurance, a company takes in to account the amount of its available surplus and determines its
retention based on the amt of loss it can absorb financially. Surplus, sometime referred to as policyholder’s
surplus, in the amount by which the asset of an insurance exceeds its liabilities A company’s retention may
range from a few lakhs rupees of thousands of crores. The reinsurer indemnifies the loss exposure above the
retention, up to the policy limits of the reinsurance contract. Reinsurance helps to stabilize loss experience on
individual risks, as well as an accumulated loss under many policies occurring during a specified period.
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2. Stabilization:
Insurance often seeks to reduce the wide swing in profit and loss margins inherent to the insurance business.
These fluctuations result, in part, from the unique nature of insurance, which involves pricing a product whose
actual cost will not be known until sometime in the future. Though reinsurance, insurance can reduce these
fluctuations in loss experience, thus stabilizing the company overall operating result.
3. Catastrophe protection:
Reinsurance provides protection against catastrophe loss in much the same way it helps stabilize an insurer’s
loss experience. Insurer uses reinsurance to protect against catastrophes in two ways. The first is to protect
against catastrophic loss resulting from a single event, such as the total fire loss of large manufacturing plant.
However, an insurer also seeks reinsurance to protect against the aggregation of many smaller claims, which
could result from a single event affecting many policyholders simultaneously, such as an earthquake as a
major hurricane. Financially, the insurer can pay losses individually, but when the losses are aggregated, the
total may be more than the insurer wishes to retain.
Though the careful use of reinsurance, the descriptive effect catastrophes have on an insurer’s loss experience
can be reduced dramatically. The decision a company makes when purchasing catastrophe coverage are
unique to each individual company and vary widely depending on the type and size of the company purchasing
the reinsurance and the risk to be reinsured.
4. Increased capacity:
Capacity measures the rupee amount of risk an insurer can assume based on its surplus and the nature of the
business written. When an insurance company issues a policy, the expenses associated with issuing that
policy-taxes, agents’ commissions, administrative expenses-are changed immediately against the company’s
income, resulting in a decrease in surplus, while the premium collected must be set aside in an unearned
premium reserved to be recognized as income over a period. While this accounting procedure allows for
strong solvency regulation, it ultimately leads to decreased capacity because the more business an insurance
company writes, the more expenses that must be paid from surplus, thus reducing the company’s ability to
write additional business
FUNCTIONS OF REINSURANCE: -
There are many reasons why an insurance company would choose to reinsure
as part of its responsibility to manage a portfolio of risks for the benefit of its
policyholders and investors
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(1) RISK TRANSFER
The main use of any insurer that might practice reinsurance is to allow the company to assume greater
individual risks than its size would otherwise allow, and to protect a company against losses. Reinsurance
allows an insurance company to offer higher limits of protection to a policyholder than its own assets would
allow. For example, if the principal insurance company can write only $10 million in limits on any given
policy, it can reinsure (or cede) the amount of the limits more than $10 million. Reinsurance’s highly refined
uses in recent years include applications where reinsurance was used as part of a carefully planned hedge
strategy.
(2) INCOME SMOOTHING
Reinsurance can help to make an insurance company’s results more predictable by absorbing larger losses
and reducing the amount of capital needed to provide coverage.
(3) SURPLUS RELIEF
An insurance company's writings are limited by its balance sheet (this test is known as the solvency margin).
When that limit is reached, an insurer can either stop writing new business, increase its capital or buy "surplus
relief" reinsurance. The latter is usually done on a quota share basis and is an efficient way of not having to
turn clients away or raise additional capital.
(4) ARBITRAGE
The insurance company may be motivated by arbitrage in purchasing reinsurance coverage at a lower rate
than what they charge the insured for the underlying risk.
(5) REINSURER’S EXPERTISE
The insurance company may want to avail of the expertise of a reinsurer regarding a specific (specialized)
risk or want to avail of their rating ability in odd risks.
(6) CREATING A MANAGEABLE AND PROFITABLE PORTFOLIO OF INSURED RISKS
By choosing a reinsurance method, the insurance company may be able to create a more balanced and
homogenous portfolio of insured risks. This would lend greater predictability to the portfolio re sults on net
basis i.e. after reinsurance and would be reflected in income smoothing. While income smoothing is one of
the objectives of reinsurance arrangements, the mechanism is by way of balancing the portfolio.
(7) MANAGING THE COST OF CAPITAL FOR AN INSURANCE COMPANY
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By getting a suitable reinsurance, the insurance company may be able to substitute "capital needed" as per
the requirements of the regulator for premium written. It could happen that the writing of insurance business
requires x amount of capital with y% of cost of capital and reinsurance cost is less than x*y%. Thus, more
unpredictable or less frequent the likelihood of an insured loss, more profitable it can be for an insurance
company to seek reinsurance.
REINSURANCE NEEDS
There are several reasons for an insurance company to use reinsurance. We will discuss here the most important
ones.
Increasing underwriting capacity
Insurance companies are often offered risks that may surpass their financial strength. Ceding part
of the risk may allow them to accept the full risk thus satisfying client’s needs. For this purpose,
insurance companies may also use coinsurance. However, in this case the insurance company will
have to contact competitors to share part of the risk which might not be to its best interest, especially
in a competitive market. Another disadvantage to the use of coinsurance is the burden put on the
insured that will need to deal with each one of the participating insurance companies about premium
payments and claim settlements.
Risk capital improvement and diversification

Insurance companies having a more diversified portfolio of risks will tend to have more stable financial results.
Using reinsurance will allow insurance companies to participate in a diversity of risks using the same working
capital by ceding part of the risk and keeping a smaller portion of each risk. This reduction in the concentration
on risk will diminish the volatility of the annual results. Figure 2 illustrates this reinsurance effect. Here, without
reinsurance the company’s capital commitment allows its participation in only one risk. Using reinsurance, the
same committed capital allows the company to participate in four different risks with a total higher sum insured.
Surplus relief
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The use of reinsurance allows insurance companies to partially transfer risks off their balance sheet. While the
ultimate responsibility to the policy holders remains with the insurance company, most juris-dictions recognize
reinsurance as a risk managing tool that allows a reduction of statutory surplus requirements. The guarantee
implicit on a reinsurance contract to pay the reinsured claims is recognized in the capital requirements for the
cedant. Hence it is not uncommon to base the prudential requirements on the insured premium net of
reinsurance.
Reinsurance thus removes a technical risk, but it introduces a counterparty risk since, as mentioned above, the
ultimate responsibility to the policy holders remains with the insurance company. To offset the counterparty
risk additional surplus is usually required. This additional capital will vary depending on the solvency rating
of the reinsurer. Also, the amount of surplus relief granted will depend on that rating.
Catastrophic protection
Well run insurance companies accept risk exposure according to their financial strength. However, the risks
may also be exposed to extreme infrequent events, like earthquakes, floods, plane crashes and other mayor
catastrophic events. Holding enough capital for those extreme events would make the insurance operation
economically unviable or at least very expensive. Transferring this exposure to cata-strophic events to the
reinsurers is a more effective way to address very infrequent events. Reinsures offer catastrophic protection in
a more economic feasible way than insurance companies by participating in catastrophic exposures throughout
the world and thus geographically better diversifying the risk. Usually reinsurers are also more capitalized than
insurance companies. They also operate dedicated departments that have gained substantial knowledge of the
physical characterise-tics and history of catastrophic events thus allowing them to price and underwrite properly
the exposure and accept those risks.
Expertise transfer
Through the reinsurance activity reinsurers acting in several markets with different insurance
companies can acquire signify can’t knowledge of the different products, markets and insurance
techniques like underwriting, administration of the policies and claims assessment. This is
particularly important when entering a new market, a new line of business or simply launching a new
product. Transferring the risk through reinsurance may also include the shift of the underwriting,
administration, or other activity related to the risk transferred to the reinsurer. Such a reinsurance
agreement allows insurers to focus in their core business outsourcing to experts the non-core
activities.
Financing new business
As discussed in Module 1 a rapidly growing insurance activity can require upfront financing. This is
particularly true in the case of Life Insurance business. Here the insurance company must finance the
agents or broker’s commissions that can be as high as the full first year’s premium as well as the
underwriting costs that may include medical examinations and financial assessments. Reinsuring part
of the business can provide a source of financing especially if the reinsurer agrees to advance the
future expected profits of the business in the form of reinsurance commission. This source of
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financing of insurance business can be attractive compared to other sources such as bank loans or
equity. Reinsurers, knowing the business, will have lower risk charges than non-insurance financing
sources. Also, in most reinsurance agreements the pay back is contingent on the performance of the
reinsured business. i.e. the advancement of future profits is only recovered by the reinsurer if the
business generates those expected profits. If the payback of the reinsurance financing is totally
contingent on the performance of the reinsured business, in most jurisdictions no liability needs to
appear in the balance sheet of the cedant.
Other reinsurance needs and a word of warning

Insurance companies enter reinsurance agreements for one or more of the above-mentioned reasons. There
might be other special situations where reinsurance is used as a valid financial and operational tool, however if
none of the above-mentioned needs is present, special scrutiny of the transaction is required. The great
flexibility of reinsurance treaties that allows effective tailor-made solutions to meet individual insurance
company’s needs has been abused in the past to design tax avoidance, money laundry and other illegal activities.
A reinsurance agreement that does not transfer any type of risk is always questionable.
WAYS TO REINSURE
There are three basic ways in which MIU can be reinsured:
- Pooled reinsurance — MIUs join in a relationship that links them only through the pool. There is typically
some form of standardization across the pool to ensure transparency and avoid one scheme profiting at the
expense of another. The more heterogeneous the MIUs the better the pool advantage, and the more regionally
dispersed, the lesser risk of fluctuation due to epidemic or natural disaster. Pooling enables better use of
reserves.
-Reciprocity also enables a better use of reserves, but in this case the MIUs are known to one another and
probably have other ties and commonalities.
- Subsidies from government or donors — this may sustain the MIU but may also send inappropriate signals
to the key players. The lessons from previous insurance experience indicates that subsidies can worsen or
alleviate market failure depending on where into the system they are paid, that there may not be a perfect
method to subsidies, and no matter how well run an MIU subsidy may be essential in the long run due to the
gap.
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CHAPTER 2
TYPES OF REINSURANCE AGREEMENTS
Types of
Reinsurance
Treaty Facultative
reinsurance reinsurance
Most reinsurance contracts are either automatic treaty or facultative. Under a treaty reinsurance arrangement
all risks that are defined to be object of the agreement are ceded automatically to the reinsurer, and the reinsurer
agrees to accept all those risks. On a facultative treaty the cedant decides if a risk will be offered to the reinsurer
and the reinsurer will decide on an individual basis if it will accept or not the offered risk. There is a third less
common treaty structure called facultative-obligatory reinsurance. Here, the offering of the risks to the reinsurer
is on a facultative basis but the acceptance of the risks is obligatory for the reinsurer.
Treaty reinsurance
Treaty reinsurance allows the cedant to act in an independent and fast reacting way when accepting risks that
fall under the object of the reinsurance agreement. In treaty reinsurance the acceptance of the risk by the
reinsurer together with all financial conditions has already been negotiated and agreed upon. This characteristic
of treaty reinsurance to offer “blind acceptance” of the risks to the cedant requires that the reinsurer know and
trust the cedant. Treaty reinsurance is there-fore only offered after the reinsurer has done proper due diligence
on the insurance company to determine the quality of the business that would expect to reinsure. The important
aspects that a reinsurer will pay attention to include: the expertise of the company, its risk attitude, its track
record, the expected amount of business to be reinsured and other technical aspects. Further, on a regular basis
the reinsurer will audit the cedant to ensure that the terms of the treaty are followed: the underwriting guidelines
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are respected, the types of accepted risk comply with the object of the treaty, all risks that needed to be ceded
have been ceded, proper accounting and administration was done, etc.
Proportional quota share reinsurance
Under a Quota Share reinsurance treaty, the cedant transfers the same proportion or quota of each risk that falls
under the object of the reinsurance agreement to the reinsurer (See figure 3). The premium, expenses and claims
are also shared in the same proportion with the reinsurer. The reinsurer pays the cedant a reinsurance
commission to compensate it for the acquisition and administrative expenses of the business. Also, it is quite
typical to include a profit sharing formula that allows for sharing profits of the reinsured business with the
cedant. This is done to reward the cedant for the quality of its underwriting and selection of the accepted
business. The proportionality of the agreement also applies to any type of reserves that the business may require.
The reinsurer is responsible for maintaining the appropriate reserves for its share in the business. Some
jurisdictions require that certain reserves should be kept with the cedant or in a trust. In these cases, the reinsurer
will send the necessary assets to the cedant or the trust to build the reserve corresponding to the reinsured
business. The above indicated terms are usually first documented in a reinsurance slip when making a
reinsurance offer. The slip will then be used to draft the definitive treaty. A slip containing the most important
terms of a Quota Share agreement is attached in Annex 1.
Surplus or excedent reinsurance
This type of proportional reinsurance is basically a Quota Share agreement that assigns a different proportion
to be reinsured to each risk (see figure 4). To determine the proportion of the risk to be reinsured, the insurance
company fixes an amount called retention or surplus line as the maximal sum insured that the company will
retain on own account. Any amount above the retention and up to a given amount called capacity of the contract
will be reinsured. The capacity some-times is given in number of surplus lines.
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Surplus reinsurance allows the cedant to change the level of participation on any type of risk by choosing a
given surplus line for that specific type of risk. As an illustration let us consider a treaty where the retention is
US$50 and the capacity US$200 or four surplus lines:
 Here a risk that has a sum insured of US$100 will be shared among the insurer and the reinsurer in a
50% proportion (risk 1 in figure 4).
 For a risk having a sum insured of US$250, the proportion will be 20% for the insurer and 80% for the
reinsurer (risk 2 in figure 4).
 A risk that has a sum insured lower than the retention will not be reinsured at all (risk 3 in figure 4).
 Similarly risks with a higher sum insured than the capacity will not be part of the reinsurance agreement
(risk 4 in figure 4).
 However, note that there are different practices, and, in some markets, reinsurers will accept risks having
a sum insured higher than the capacity to be reinsured up to the capacity of the surplus treaty (risk 5 in
figure 4).
Financing elements
Proportional reinsurance creates a strong alignment of interest between the insurer and the reinsurer
since premium, expenses and claims are shared in a proportional manner. The reinsurance premium
volume is high as compared to the non-proportional reinsurance because of the sharing of the
expenses. A high-volume premium may allow the reinsurer to finance substantial upfront costs in
exchange of the future profits of the reinsured business.
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Pricing
The pricing or determination of the amount of the reinsurance premium in proportional reinsurance
is basically dictated by the underlying insurance premium, as it usually is a percentage of that
premium. Also, the amount of reinsurance commission should directly reflect the actual costs that
the cedant undergoes in acquiring and administering the business. More involved calculations are
needed when determining the profit sharing formula. Here sophisticated stochastic models are used.
Finally, when the reinsurance agreement includes some sort of financing, for instance in the form of
advancing future profits, considerations of cost of capital, credit risk and risk of the business not
performing as expected must be taken into consideration when pricing the reinsurance allowance.
Facultative reinsurance
Insurance companies are offered from time to time the opportunity to insure risks that are very large
or complex or simply unusual. In these situations, facultative reinsurance is the best alternative.
Here the reinsurer participates in the underwriting and assessment of the risk. Depending on the
risk the reinsurer might or might not accept the reinsurance. In case of acceptance the reinsurer will
provide the terms, like premium, exclusions, and so forth. The already negotiated facultative treaty
will govern all other general terms of the agreement.
Non-proportional reinsurance
Insurance companies that are looking mainly to protect their portfolio from adverse experience that could result
from too many claims or too high claims will usually enter non-proportional reinsurance agreements. In non-
proportional reinsurance the protection is provided based on the actual loss the insurer suffers and not the sum
insured of the risk.
Surplus proportional reinsurance as describe above requires that the sum insured of every individual risk is
known to determine the proportionality in sharing the risk. There are however several insurance products where
the sum insured is not always known, such as MTPL in the UK or commercial liability in the US, etc. In these
cases when individual differentiated risk protection is desired, non-proportional reinsurance can be used.
Excess of Loss reinsurance
The basic type of non-proportional reinsurance is the excess of loss reinsurance (XL). In an excess of loss
agreement per risk the cedant will pay in case of an event affecting a reinsured risk the claimed amount up to a
fixed chosen quantity called the priority of the agreement. The reinsurer will then pay any excess amount
claimed above the priority up to the capacity of the contract.
As an example, consider in figure 5 an excess of loss agreement where the priority is US$20, and the capacity
is US$100 (US$100 XL US$20):
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 A claim of US$50 will cost US$20 to the cedant and US$30 to the reinsurer (see figure 5 risk 1).
 A claim of US$15 will be totally paid by the cedant since the total amount is below the priority (see
figure 5 risk 2).
 A claim of US$130 will cost US$20 +US$10=US$30 to the cedant and US$100 to the reinsurer. Here
the full capacity of the treaty has been exhausted leaving an additional US$10 uncovered amount for
the cedant (see figure 5 risk 3).
Note the important difference to the surplus reinsurance that the excess reinsurance only covers actual losses
above the priority, so that small claims on the reinsured risk are not protected.
The reinsurance premium for an excess of loss agreement is not proportional to the direct premium
collected by the insurer and is determined by the probability of having claims above the priority and
attendant cost of capital. Also, as mentioned before there might be a conflict of interests between the
cedant and the reinsurer: The financial incentive of the cedant on settling the claim disappears the
moment the claimed amount is higher than the priority since beyond the priority the liability is
transferred in full to the reinsurer up to the capacity of the treaty. To avoid these situations some
agreements, require either that the reinsurer must approve payments above the priority or that the
cedant retains a co-payment of the liability above the priority.
Stop loss reinsurance
An excess of loss agreement on the whole portfolio is called a Stop Loss coverage. The reinsurer will
protect the cedant only in case the priority is exceeded by adding up all claims paid during the period
of coverage, usually one year. In a typical Stop Loss coverage, the priority is expressed as a
percentage of the insurance premium and in most cases a co-payment more than the priority is
required. Annex 2 contains a stop loss slip with the main parameters.
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 To better understand figure 6 illustrates the way a stop loss coverage works consider a stop loss
agreement that has as priority 80% of the insurance premium, 20% of the insurance premium as capacity
and a co-payment of 25% above the priority.
 In example 1 the total annual amount paid in claims is 70% of the insurance premium and hence it does
not exceed the priority of 80%. Here the reinsurer will not participate in the payment of claims.
 In example 2 the total amount paid in claims is 100% of the insurance premium. The reinsurer pays an
amount equal to 16% of the insurance premium. The cedant pays the full priority of 80% and a co-
payment of 4% of the insurance premium.
 In example 3 the total amount paid in claims is 115% of the premium. The reinsurer pays an amount
equal to the full capacity of 20% of the insurance premium. The cedant pays the full priority of 80% and
a co-payment of 6.67% of the insurance premium. The remaining amount of 8.33% of the insured
premium is not reinsured and the cedant remains responsible for that amount.
Catastrophic excess of loss reinsurance
 There is a third class of non-proportional reinsurance form called cata-strophic excess of loss
reinsurance (Cat-XL). Here, in addition of the necessity to exceed the priority to have
reinsurance protection also the catastrophic event must have taken place. Catastrophic events
can be for instance an earthquake, an explosion that has a toll of at least 3 lives, and so forth.
 Catastrophic reinsurance does not cover every event. Typical standard exclusions in a Cat-
XL agreement are the claims related to nuclear or radioactive incidents. Terrorism is also a
common exclusion. For these risks as well as other political risks, government or national
industry pools have been established. We discuss pools later in the module.
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Pricing
 The pricing of non-proportional reinsurance is an involved activity that is done by

experienced actuaries. Among the methods used in determining the cost of reinsurance
are the burning cost evaluation, scenario modelling and exposure pricing. Burning cost
evaluation looks at the experience of the claims above the priority and below the
capacity with adjustments made for inflation, changes in conditions, etc. The resulting
cost is the necessary amount to pay expected claims or the so-called risk premium.
The reinsurance premium is then the risk premium loaded for expenses and profit. The
scenario modelling uses mathematical models that utilize claim distributions to
simulate the risk exposure of the reinsured portfolio. Several simulations are run to
determine the probable loss above the priority and below the capacity of the treaty.
Again, this cost is loaded for expenses and profit to determine the reinsurance
premium. Finally, the exposure pricing looks at the existing reinsured portfolio and
assigns empirical probabilities for claims to occur to every risk reinsured that could
result in amounts above the priority.
 In non-proportional reinsurance the typical duration of an agreement is annual since

changes in the market conditions, the economy and the reinsured portfolio affect
directly the reinsurance costs. A non-proportional agreement does not offer a profit
sharing participation that in case of the proportional reinsurance is used to
compensate the cedant for good underwritten business because of the different expo-
sure that the cedant and the reinsurer have here.
Reinsurance programs
Reinsurance provides a flexible and effective tool to insurance companies for the management of the risks they
are assuming. A combination of several reinsurance agreements is called a reinsurance program. A well-
structured reinsurance program will provide important competitive advantage but can be quite complex.
Several reinsurers may participate in a reinsurance program accepting different percentages of the program.
This structure is some-time called a reinsurance pool.
As a simple example consider the effect of combining a 50% Quota Share with a US$50 XL US$20 in different
order. Figure 7 indicates the participation of the cedant, the Quota Share reinsurer and the XL rein-surer in case
of a claim of US$100.
 In example 1 the claim is first split 50% between the cedant and the Quota Share reinsurer. Then
the XL coverage protects the share in the claim of the cedant of US$50 paying US$30 more than
US$20.
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 In example 2 the XL pays US$50 of the claim and the cedant is left with a claim of US$70.
Then the Quota Share reinsurer assumes half of that payment.
Regulatory framework
Sec. 101A of the Insurance Act 1938 stipulates that every insurer shall re-insure with Indian reinsurers such
percentage of the sum assured on each policy as may be specified by IRDA. The IRDA has prescribed 15 per
cent of the sum insured of every policy from 1 April 2007. It was earlier 20 per cent. This is called obligatory
cession. The Insurance companies draw up reinsurance programmes for various classes of risks to fix retention
limit of risks commensurate with their financial strength.
IRDA (General Insurance-Reinsurance) Regulations, 2000 govern the reinsurance arrangements. Regulation
3(1) stipulates that the reinsurance programmes of insurance companies should be guided by the following
objectives:
• maximise retention within the country,
• develop adequate capacity,
• secure the best possible protection for the reinsurance cost incurred and
• simplify the administration of business.
Corporate governance
IRDA in its circular of 3 November 2004 to all general insurers advised the introduction of internal procedures
necessary to ensure compliance with the guidelines for good corporate governance, with immediate effect.
The guidelines, require the Board of Directors of insurance companies to:
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• prescribe clear policies and procedures for implementing the reinsurance strategy, including setting
underwriting guidelines, policy terms and conditions, aggregate exposure, establishing limits on the amount to
be automatically covered by reinsurance and procedures of acceptance of risk exceeding the automatic capacity,
• fix the retention level, based on well researched recommendations about net retention per risk and per event
for each class of business,
• maintain an up to date list of approved reinsurers, which carry the minimum rating together with the approved
level of exposure,
• determine the automatic insurance capacity and catastrophe cover along with the workings because it was
determined, be informed of the exposure to the net account, in case of retention of risk at a level higher than
permitted by the reinsurance programme,
• accord prior written approval where reinsurance terms are different from the terms of original insurance and
obtain reports on the additional exposure arising out of it,
• ensure that there is a management information system in place conforming to the requirement on reporting
frequency and level of detail of every claim,
• ensure that there is an adequate internal control system for reporting the claims to the appropriate reinsurer.
The guidelines also emphasised the need for regular audit and examination of claim recovery.
Audit objectives
The performance audit aimed to assess the performance of the reinsurance programmes and to ascertain that:
• reinsurance programmes of the companies were designed to maximise retention of insurance premium within
the country;
• the regulatory framework was complied with;
• the process of selection of brokers and reinsurers was transparent and objective;
• the existing Management Information System was effective; and
• internal audit in relation to reinsurance was regular and adequate.
Results of Reinsurance Department Operations

The performance of reinsurance operations of the four PSUs for the past three years is given in Table 3.1:
18
The profits in reinsurance operations arise when recoveries from reinsurers towards claim paid exceed the
premiums ceded. Loss in reinsurance indicates that cessions made were more than the loss recovered from the
reinsurers.
The operating results of GIC, the national reinsurer, are given in Table 3.2
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Retention of adequate capacity within the country
Table 3.3 would show that the broad objective of maximum retention within the country has largely been
achieved. However, GIC stated that there was further scope to improve retention levels within the country and
that its capacity to underwrite and accept risk should be fully utilised by the companies. In NIC, foreign cessions
during 2006-07 were abnormally low due to booking of cessions to foreign reinsurers through Indian brokers
as Indian cession.
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CHAPTER 3
REINSURANCE INDUSTRY
As one of the business market research paper has put it “Reinsurance is an international, multibillion dollar
industry that is vital to the financial stability of all types of insurance companies.” It is a method of ceding
part of the financial risk the direct insurers assume by accepting risk from risk owners, particularly mega risk,
mainly against the earthquakes, tsunami, terrisom, etc. However, in terms of magnitude / size, reinsurance is
highly complex global business and for example, it accounts for more than 9% of the total premiums generated
from property.
The whole mechanism of insurance and reinsurance being a dynamic process. The electronic media and
internet technology have substantially added to the efficiency and simplification of mechanism of reinsurance
operations. The increased use of information and internet technology by the insurance companies have made
collecting, compiling, and data warehousing of updated technical data on millions of mega risks faster and
revolutionized the procedural input on underwritings, accounting and claims processing and settlement by
both primary insurance and reinsurance.
The new type of electronic system specific transactional methodology since put in place has cut short the
embarrassing delays in reinsurance acceptance, cessions and adjustment or settlement among the participating
companies. Looking to the latest trend and overwhelming success rate of multi benefit life insurance products
like ULIPs and pension plans, which combine risk cover with investment components.
Participants of the reinsurance industry

As discussed above the main participants in the reinsurance industry are the professional reinsurers,
the retrocession Aires and the insurance companies. Reinsurance brokers also play a fundamental
role in the placement of reinsurance programs, in particularly when dealing with special programs.
Captives, Pools and Offshore Reinsurers complete the reinsurance industry.
Reinsurance brokers
For complex reinsurance programs or when the reinsurance capacity is scarce, insurance companies
utilize the services of reinsurance brokers. Reinsurance brokers are companies or professional
individuals that are licensed and supervised dedicated to providing professional advice to insurance
companies on the placement of their reinsurance programs. Reinsurance brokers are paid through
reinsurance commissions that are proportional to the placed reinsurance premium. Reinsurance
brokers also offer administrative services and product development. In most jurisdictions reinsurance
brokers are required to hold an error and omissions liability policy for the protection of the insurance
companies.
In recent years the press has reported on major financial scan-dals related to the non-transparency
of the reinsurance commissions. Professional reinsurance brokers have reacted offering detailed
disclosure of their commissions
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Captives
Large industrial conglomerates that are interested in keeping their risks within the group usually operate with a
captive. A captive is a legal entity, usually a stock insurance company owned by the group that accepts and
retains risks emanating only from the same industrial group.
Pools
Insurance companies may want to insure an unusual or new type of risk but fear they will not have enough
business of that type to benefit from the law of large numbers. In an insurance pool, several companies agree
to share all their risks of this type. This will provide a large enough sample to give more predictable and
consistent results from year to year. The pool could be reinsured or the sharing of each policy in the pool may
be according to how much business each company puts into the pool or it could be a formula relating to how
much risk each company would accept on any one case. Pooling was in fact the way insurance of modern
passenger airplanes began. The World Bank has been promoting pools to cover catastrophic risks like the
Turkish Catastrophic Insurance Pool (TCIP) and the Caribbean Catastrophic Risk Insurance Facility (CCRIF).
Offshore reinsurance
Offshore reinsurance companies are reinsurers which operate in special geographic zones, often with less
demanding regulatory and favourable tax environments. A great deal of reinsurance is conducted through
these centres although much of the actual management of these companies is done in the parents’ home offices
in Europe, London and New York. The purpose of offshore reinsurance has been to optimize the use of capital
and thus create competitive advantage.
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However, special scrutiny is required when offshore reinsurance is involved. The lack of a strict regulation or
the low capital requirements in some offshore centres can lead to failing reinsurers in case of mayor claims.
Also, money laundering activity has used this type of reinsurance in the past.
Regulatory and supervisory issues

The authorities in many countries are becoming concerned about the quality of reinsurance purchased by
domestic insurers. The reinsurance credit that is granted to the cedants in the form of a reserve or capital
reduction can only be justified if the reinsurer is at least as solvent as the insurance company. Minimum security
to operate as a reinsurer is usually required and the amount of reinsurance credit granted will depend on the
quality of the security. In some jurisdictions additional risk capital is required when using low rated reinsurers.
Virtually every insurance supervisor in the world has the right to monitor reinsurance arrangements
for domestic insurers and to require that they be strengthened. Regular information on the reinsurers
can be obtained from the supervisory authorities at their legal domicile.
Professional reinsurers play an important role somewhat related to supervision. Reinsurers impose
discipline on the reinsured companies particularly in emerging markets. It is the reinsurers who tell
them what reserves to hold and what premiums to charge. In countries where there is little or no
insurance regulation this an extremely important role played by the reinsurer.
Accounting and control issues

Reinsurance accounting is very complex and only partly covered here. A dedicated module on
accounting for insurance activities will be published later in this series.
Because of the importance of reinsurance in the impact of the finances of the insurance companies,
the governance structure of the insurer should ensure that the boards take interest in this topic and
the internal control systems should ensure that the appro-pirate reinsurance program is in place.
Understanding a reinsurance treaty

Treaty format
A reinsurance treaty in very general terms defines payments between insurance companies. In
diagram form it looks like this:
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In this diagram Company 1 cedes business to the Reinsurer. The treaty calls for Company 1 to make payments
to or transfer funds to the reinsurer. These payments are usually called something like
(1) deposit premium,
(2) annual premiums
(3) investment income, and
(4) risk charge.
Not all treaties will have all these items, and some may have more.
The reinsurer must also make payments or transfer funds to Company 1. These payments will be called
something like
(1) reinsurance commissions,
(2) expense allowance,
(3) claims and
(4) increase in reserves.
Again, not all treaties will have all these items, and some might have more.
The treaty may also have a provision to share the profit with Company 1 and that share of the profit goes
back under such names as profit sharing, experience rating refund or profit charge or profit commission.
In most cases the payments between the companies are netted so that only one transfer of funds takes place.
This is called the right of offset. Each company has the right to offset what it owes and what it is owed.
The flexibility in reinsurance is that each one of these terms can be defined in many ways. Some points to
look for include:
 Who is the reinsurer? Is it a strong reputable company?
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 What is the definition of the business reinsured? The block of business should be identified in a clear
manner giving the date of issue, the policy form used for the business, the type of business and any
information needed to identify the premiums, reserves etc.
 What is the risk reinsured? Is it all the risk that the direct writing company has assumed? If it is not
being the reserves calculated accordingly? Are the reserves to be held by each side actuarially correct?
 Under what conditions does the reinsurer have to pay? Is there liquidity in the treaty? Will the reinsurer
have to pay cash immediately upon a claim or will it be able to delay payment?
 Under what conditions can the reinsurer cancel the contract? On cancellation what are the remaining
responsibilities of the reinsurer?
 How long does the treaty run? Is it indefinite or for a fixed time? Will the reinsurer stop
accepting new risks at a certain time? Does it stop insuring the risks it has already accepted
at that time? Who has responsibility for the claims run off tail on any business that takes a
long time to settle such as liability and marine?
 Is there an arbitration clause to settle disputes?
Some standard terms of a reinsurance treaty include:
• Parties to the agreement are the ceding company and the rein-surer. The policyholder is not
involved and hence normally has no claim on the reinsurer. In most cases the policyholder will
not know the policy is reinsured.
• Reinsurance is usually an indemnity arrangement. The reinsurer indemnifies the ceding
company for what it pays in claims.
• Both parties have the right to defend against a claim and if one chooses not to it will pay its share
to the other company and leave the other to absorb all legal costs. If the defence is successful,
the one that did not join the defence does not get a refund.
• The reinsurer has the right to inspect the records of the ceding company at any time.
• A choice of law will be stated. In case of a dispute between the parties there will be no time
wasted arguing which law applies. The clause will say that the law of Country X applies. The
choice will likely be the law of the jurisdiction of the defendant.
• The errors and omissions clause say that unintentional clerical errors will be set right in the next
statement and are not causing to cancel the contract.
• An “actuarially equivalent” clause can save pages of formula for what happens if the treaty is
terminated at different times. The treaty may say that something happens if termination is
December 31 and if at other times the actuarially equivalent adjustments will be made.
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CHAPTER 4
REINSURANCE STRATEGY
IRDA by its circular of 3 November 2004 advised that every insurer should document clear policies and
procedures for implementing the reinsurance strategy set by its Board of Directors. However, it was noticed that
though the circular was placed before the respective Boards (except NIC), no separate document detailing
policies and procedures as envisaged by the circular was prepared by any of the companies.
The companies stated that their annual Reinsurance Programmes were comprehensive documents which were
approved by their respective Boards and filed with the IRDA. Reinsurance Programmes were, by nature,
dynamic and could be modified depending on market conditions. Such modifications/deviations were authorised
by the CMDs of the companies under powers delegated to them by the Boards.
While it is agreed that the annual Reinsurance Programmes were comprehensive, they do not address all the
issues mentioned in the IRDA circular of 3 November 2004. Essentially, the IRDA circular contemplates the
framing of an over-arching strategic document under which annual Reinsurance Programmes are to be prepared.
Non-utilisation of capacity of terrorism pool

A market terrorism pool was created with effect from 1 April 2002, to be managed by GIC. All insurance
companies in India are members of the pool. The pool commenced with a capacity to cover up to Rs.200 crore
which was revised up to Rs.600 crore per location with the pool rate fixed by the Tariff Advisory Committee
(TAC)/Pool Manager from time to time. The Tariff Advisory Committee directed (April 2002) that all terrorism
risk up to the prescribed limits was required to be underwritten in the country and charged pool rate.
In respect of Mega risks (risks exceeding the pool capacity) separate terrorism risk policies were issued (2004-
07) covering the risks beyond the pool capacity by the companies. The rate applied was as per the Reinsurer’s
quote and the complete reinsurance arrangement was made on facultative basis, outside the country, instead of
availing the pool capacity.
The above underwriting of the terrorism risk was not in compliance with the TAC circular and resulted in the
non-utilisation of national capacity created. The amount of premium thus not ceded to pool was Rs.6.51 crore
(Rs.4.33 crore - NIA, Rs.1.05 crore - UIIC and Rs.1.13 crore - NIC).
UIIC replied (September 2007) that cessions to the pool would not be feasible as the rates obtained from the
market were lower than the pool rates. However, this reply must be viewed in the context of TAC’s specific
directions to underwrite the risks at the pool rate up to the capacity of the pool.
The companies stated that it was not feasible to split the cessions in case of Mega Risks exceeding Rs.600 crore.
While Audit's suggestion was noted, the Pool Manager viz. GIC stated that the Underwriting Committee of the
pool was seized of the matter and the issue was expected to be soon resolved.
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Facultative placement
Regulation 3(10) of IRDA (General Insurance-Reinsurance) Regulations, 2000 stipulates that every insurer shall
offer an opportunity to other Indian insurers including the Indian reinsurer, to participate in its facultative and
treaty surpluses before placement of such cessions outside India. It was observed that NIA has a retention
capacity of Rs.75 crore, Rs.100 crore and Rs.200 crore in the fire department in 2004-05, 2005-06 and 2006-
07, respectively. UIIC, while making facultative cessions in respect of 11 policies, did not consider the retention
capacity of NIA. This resulted in underutilisation of capacity and consequent outgo of facultative premium of
Rs.8.45 crore, in respect of 11 policies test checked in audit.
While the companies (NIC, UIIC and OIC) expressed certain difficulties in obtaining inter-company facultative
reinsurance support, it would be desirable to address this issue in Inter-Company meetings. This would facilitate
achieving the objective of maximising retention of premium within the country.
Delay in collection of Reinsurance Premium in GIC

Premia in respect of inward treaties were to be collected quarterly or half-yearly according to the terms of
treaties. During the period 2004-07, it was noticed there were delays in collecting reinsurance premia in GIC
with respect to both proportional and nonproportional treaties. Details are in Table 3.4.
The delayed receipt of premium affected the cash flow of the company.
While agreeing that there had been delays in receipt of premium in some acceptances, GIC stated that it had
recently activated a Credit Control Department to follow up on such recoveries.
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Delay in receipt of adjustment premium

GIC accepts non-proportional treaties from Indian insurance companies collecting Minimum Deposit Premium
(MDP) based on the Estimated Gross Net Premium Income (EGNPI) indicated in the Treaty. As soon as
practicable after the expiration of the treaty agreement, the reinsured (insurance companies) render a statement
of their actual Gross Net Premium Income to GIC. It was however, seen that receipt of adjustment premium of
Rs.93 lakh was delayed as detailed in Table 3.5.
GIC stated that it would control such delays in future through its Credit Control Department.
Additional exposure due to difference in terms of reinsurance
In terms of the IRDA guidelines on good corporate governance, Reinsurance departments will not have the
authority to increase the net retention of the insurer either through failure to place reinsurance or through
placement of reinsurance on terms different from terms of original risk, without prior approval of the Board.
UIIC issued 10 policies and accepted co-insurance share in respect of six policies on terms which were at
variance with the terms agreed with the reinsurers. This involved an additional exposure of Rs.511.66 crore to
the company during 2004-07. This additional exposure arose due to difference in deductibles as per the terms
of the reinsurance and terms of insurance policy.
In one specific case (Tata Motors) it was noticed that the company’s share of the claim was Rs.58.46 crore and
only an amount of Rs.24.02 crore was recoverable from reinsurers. The balance of Rs.34.44 crore was borne by
the company. This exceeded the per loss limit of Rs.15 crore as per Reinsurance Programme.
Similarly, in OIC, 39 reinsurance policies were issued during the period 2004-07 on terms which were at
variance with the terms agreed with the reinsurers. This resulted in an additional exposure of Rs.303.31 crore
to the company.
While the cases were subsequently brought before the Board for ratification, no prior approval was taken as
contemplated in the IRDA guidelines. Moreover, it was noticed that only the individual cases involving
additional risk exposure were being brought before the Boards for ratification. The overall, cumulative exposure
arising out of such cases needs to be placed before the respective Boards to facilitate a complete and proper
appreciation of risk exposure of the companies.
The companies stated that owing to competition in the market, some risks needed to be underwritten on terms
which were different from the original terms agreed with the reinsurers. Owing to the spreading of risk, it was
28
unlikely that total additional net exposure would be affected by any single accident/event. In all such cases,
approval of the respective Boards was being obtained. However, these replies do not address the issue raised by
Audit, i.e. the overall, cumulative exposure arising out of all such cases should be placed before the respective
Boards to facilitate a comprehensive appreciation of risk exposure.
Cessions based on Probable Maximum Loss

Probable Maximum Loss (PML) will always be lower than the sum insured. In 500 out of 1653 sessions in UIIC
during the period 2004-07, Probable Maximum Loss was higher than the sum insured for individual small
policies. The company had made cessions in respect of those policies based on PML. As the maximum loss in
those policies would not exceed the sum insured, the adoption of PML for making cessions was inappropriate.
This resulted in excess cession of premium amounting to Rs.3.32 crore in Fire Department.
UIIC stated (September 2007) that there had been an error. The company was attempting to have a system in
place for underwriting such policies and cessions thereon, so that such errors did not recur in future.
Similarly, in 183 out of 1653 cessions reviewed in audit, UIIC adopted the entire PML instead of only their
share of PML for making cessions. This resulted in additional exposure to the Company’s account. UIIC agreed
(October 2007) that, in future, risks would be classified appropriately based on their share of the risk.
Empanelment of brokers
The Government of India, Ministry of Finance in its circular of September 2002 to insurance companies on
corporate governance had instructed that there should be a credible system of empanelment of brokers. It was
further stated that managements should develop detailed guidelines for empanelment and usage of these
intermediaries. These guidelines were to be submitted to the respective Boards for approval.
However, the companies did not develop detailed guidelines for empanelment of brokers. It was noticed that
UIIC and NIA approached certain brokers for obtaining quotes from reinsurers merely indicating the
geographical area from which they had to obtain quotes. In UIIC, three brokers obtained 45 and 51 per cent of
the total business placed through brokers in 2005-06 and 2006-07, respectively. UIIC stated (September 2007)
that the audit observations were duly taken note of and that the utilisation of intermediaries was being
progressively broad-based, to the extent possible.
In NIC, it was noticed that an amount of Rs.5.23 crore was ceded to certain reinsurers through brokers even
though the company was also directly placing business with the same reinsurers.
The companies responded that they were following specific criteria while selecting brokers including reputation
in the international reinsurance market, experience of the companies with the brokers, advice on Reinsurance
Programmes, etc. However, the intention of the Ministry's circular of September 2002 is that the companies
should develop detailed guidelines which should underpin a credible system of empanelment of brokers. These
guidelines are also required to be approved by the respective Boards.
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Rates of reinsurance commission on outward cession

In terms of the Government of India, Ministry of Finance Circular dated 18 September 2002, in the absence of
any policy guidelines from the Board, companies were not to resort to reducing commission receivable on
reinsurance ceded, thereby reducing quotations to client. Reinsurance commission was meant to take care of the
cost of procurement, cost of funding claims till recovery was made from the reinsurers and to account for any
non-recovery in the event of their going insolvent. The companies were advised not to reduce reinsurance
commission indiscriminately. A proper policy was to be framed by each company and any deviation was to be
made only by Chairman cum Managing Director on basis of a reasoned order. A summary of such decisions
would be reported to Board immediately.
However, it was noticed that the companies had not developed policies as contemplated in the circular of
Ministry of Finance except OIC. As had been agreed earlier (March 2002) by the General Insurers’ (Public
Sector) Association (GIPSA), a minimum percentage of 10 would be collected as reinsurance commission. OIC,
had however stipulated a range of 5 to 20 per cent commission for different classes of business. It was noticed
that, during the period 2004-07, the four companies collected commission at rates less than 10 per cent/rates
approved by the company. This resulted in foregoing income of Rs.29.34 crore as detailed in Table 3.6.
Table 3.6: Income foregone
Out of the 583 cessions mentioned in Table 3.6, no commission was collected in 206 cessions.
In reply, the companies (NIC, UIIC and OIC) stated that such deviations from the agreed rate of 10 per cent
were necessitated by the competitive environment. OIC periodically reports such deviations to its Board. It is
suggested that the other companies could consider reporting such deviations to their respective Boards.
Placement of business with reinsurers

Regulation 3(7) of IRDA (General Insurance- Reinsurance) Regulations, 2000 stipulates that insurers must place
business only with those reinsurers enjoying, for at least five years, a credit rating of at least BBB (Standard &
Poor) or equivalent rating of any other international rating agency.
A review of selected treaties in the five general insurance companies during the period 2004-07 revealed the
following: (a) In UIIC, an amount of Rs.7.91 crore during 2005-06 and Rs.9.96 crore during 2006-07 was ceded
to five reinsurers with rating below ‘BBB’. The company replied (August/September 2007) that they had
business relationships on reciprocal basis with some of the insurers for a long period of time even before
constitution of IRDA. However, this was not acceptable since it was in violation of the IRDA’s Regulations.
30
(b) In GIC, during 2004 and 2005, two reinsurers and during 2006, three reinsurers with rating below ‘BBB’
were given business. In respect of 21, 48 and 46 reinsurers in 2004, 2005 and 2006, respectively, even data
about the ratings was not maintained by GIC, indicating that the information system requires to be strengthened.
(c) In OIC, during the period 2004-07, reinsurance business was placed with five companies with credit rating
lower than ‘BBB’.
The companies stated that the reinsurers with whom they had placed such business were the ones with whom
they either had reciprocal arrangements or were backed by sovereign guarantees or may not have been rated.
However, these placements need to be viewed in the light of the specific regulatory requirement that reinsurers
need to have a minimum of 'BBB' (Standard & Poor) or equivalent rating of any other international credit rating
agency. If required, the companies should approach IRDA for a special dispensation.
Information flow from the regional offices

Regional Underwriting Cell (RUC) reports sent by the regional offices of companies list the details of large and
medium risk undertaken to the Reinsurance department at Head Office for making cessions. Delays were noticed
in furnishing such information as indicated in Table 3.7.
Due to delay in receipt of information the companies could not arrange required reinsurance or initiate
recoveries from the reinsurers. Some illustrative cases are discussed below:
(a) The divisional office III, MRO-II of NIA accepted co-insurance of an erection risk underwritten by
Maharashtra State Insurance Fund (MSIF). The cover was for a period of five years from April 2000 to March
2005 and the premium was to be received in 19 instalments. The division received 11 instalments and did not
intimate the fact of acceptance of risk to the reinsurance department. Consequently, no reinsurance arrangement
was made. The non-receipt of the balance instalments was not taken up with MSIF. MSIF extended the period
of cover from April 2005 to March 2007. The remaining eight instalments were paid by MSIF in January 2006
and the premium for the extended period only in May 2007. A major claim with NIA’s share Rs.36.48 crore
had occurred in June 2005. As there was no reinsurance arrangement the company passed on the claim to the
Intercompany Group Treaty (IGT) for Rs.22.24 crore and borne the balance amount of Rs.14.24 crore. The
failure of the divisional office to inform the reinsurance department of the acceptance of the risk resulted in
burdening the IGT with a claim without prior concurrence of the participating insurers.
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(b) In OIC, it was found that there were 28 and 85 policies during 2005-06 and 2006- 07, respectively that had
not been placed with reinsurers. In terms of the reinsurance programme applicable for the respective years,
reinsurance protection should have been made for Rs.1262.93 crore. The company made delayed cessions in
respect of 85 policies for Rs.1052.47 crore resulting in additional exposure during 2006-07. Of these, in respect
of 25 polices the company had to retain these risks to its account as facultative support could not be arranged at
such a late stage. This resulted in additional exposure amounted to Rs. 210.46 crore for 2005-06.
(c) In UIIC, during the year 2006-07, recoveries were not raised by Reinsurance department in respect of nine
accidents, amounting to Rs.54.65 lakh as these were not reported by Operating offices to Reinsurance
department. UIIC stated (July 2007) that they were taking up the recoveries for the above cases and recoveries
would be affected in 2007-08.
(d) It was also noticed that the Namakkal Divisional office of NIC during 2004-05 did not intimate the RI
department about large claims (two accidents) of Rs.1.08 crore for effecting prompt recovery from the
reinsurers.
(e) In UIIC, during 2006-07 it was found that in respect of two policies (Miscellaneous department) cessions
were made automatically by Integrated Reinsurance System (in-house software used in Reinsurance
department). This resulted in retention of Rs.25 crore, against the permissible retention of Rs. Seven crores
under the reinsurance programme for the year. UIIC stated (August 2007) that there had been an error and
corrections would be made during the current year.
The companies stated that the delays would be overcome once CORE Insurance Solutions/INLIAS are in place.
Recoverable from reinsurers

It was noticed that UIIC and OIC had large amounts recoverable from the reinsurers at the close of the financial
years 2004-2005 to 2006-2007. The amounts outstanding were Rs.225.80 crore, Rs.1428.39 crore and Rs.140.73
crore in UIIC and Rs.245.43 crore, Rs.401.33 crore and Rs.580.31 crore in OIC for the year 2004-05, 2005-06
and 2006-07, respectively. The amounts recoverable from reinsurers were Rs.924.17 crore in GIC, Rs.1489.63
crore in NIA, and Rs.118.95 crore in NIC as on 31 March 2007.
In UIIC, it was noticed that of the amount outstanding as on 31 March 2007 an amount of Rs.22.92 crore was
recoverable from 25 reinsurers who had gone into liquidation. Similarly, in respect of OIC, an amount of
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Rs.42.91 crore remained un-recovered for over six years. It was also noted in OIC that Rs.1.44 crore was due
to be received from the reinsurers who had gone into liquidation.
In NIA, the recovery from foreign Facultative Reinsurance was pending for more than three years to the extent
of Rs.4.64 crore (Engineering Department) and Rs.1.67 crore (Miscellaneous Department).
The companies (GIC, UIIC and OIC) replied that steps were being taken to recover the amounts due.
Settlement of balances and rendering of accounts
In NIC, the outstanding claims as per Marine Hull Register maintained at Reinsurance department was
Rs.131.36 crore and as per balance sheet it was Rs.37.33 crore as on 31 March 2007.
This amount has not been reconciled NIC stated that the reconciliation would be carried out.
Internal audit
Internal Audit of the Reinsurance departments would normally cover key aspects of the implementation of the
reinsurance strategy. These would include examining whether cessions were made as per the approved
Reinsurance programme; whether all risks were covered in time and whether recoveries in respect of each treaty
were affected as per the cessions made.
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Internal audit would also examine terms and conditions of all treaties (Inward, Outward, Facultative and Excess
of Loss) and review whether these were communicated by the treaties department to the accounts department
in time. Internal audit would also review the efficacy of systems and procedures in place. These areas have been
outlined in the Internal Audit Manual of UIIC. Internal audit, in the other companies would also need to review
these aspects.
It was noticed that during the period 2004-05 to 2006-07, internal audit of Reinsurance departments was not
conducted in UIIC and OIC. In NIA and NIC, the internal audit was completed up to 2006-07. In GIC, the
internal audit work has been outsourced from 2006-07 onwards. Given the nature and significance of
reinsurance transactions, it is essential that regular and effective internal audit be undertaken. The need for
regular internal audit had also been emphasised in IRDA’s circular of November 2004 on corporate governance.
OIC stated that internal audit was programmed for the Reinsurance Department for the year 2007-08.
Tax issues
Reinsurance sent outside the country is often subject to excise tax, usually from 1% to 3% of reinsurance
premiums. Tax treaties between countries sometimes address the issue of excise tax and in some cases,
exemptions are granted. For instance, there is no US excise tax on reinsurance treaties with the UK. The path
that reinsurance follows is highly dependent on the tax treaties between nations.
Hence reinsurers will have a good knowledge of these treaties as the tax of say 2% of premiums is significant.
Another consideration is the withholding tax on dividends paid by reinsurance companies to their parents. The
absence of such withholding tax or the exemption within a tax treaty also influences reinsurance activity.
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CHAPTER 5
NEW REINSURANCE PLAYERS
Until recently, the General Insurance Corporation of India (GIC) was India's sole reinsurer. The GIC was
established in 1972 under a statute as a wholly owned company of the government of India, along with four
subsidiaries, which together operated the general insurance market in India. Pursuant to the liberalisation of the
Indian insurance sector in 2000, the GIC was made India's sole reinsurer to better address the reinsurance
requirements of the growing number of insurance risks in India.
In this regard, notably, every Indian insurer must cede a certain percentage of the sum assured on each policy
for different classes of insurance written in India to the GIC, as per Section 101A of the Insurance Act 1938.
Although Indian insurers must cede at least the mandatory percentage as prescribed, in practice, an offer must
be made to the GIC and the GIC may accept the offer in whole or in part. The Insurance Laws (Amendment)
Act 2015, which brought about extensive amendments to the Insurance Act, also permits the establishment of
branch offices in India by foreign companies engaged in reinsurance business (foreign reinsurer branches).
35
Pursuant to the Amendment Act, between 2015 and 2016 the Insurance Regulatory and Development Authority
of India (IRDAI) issued the IRDAI (Registration and Operations of Branch Offices of Foreign Reinsurers other
than Lloyd's) Regulations 2015 (Branch Office Regulations) and the IRDAI (Lloyd's India) Regulations 2016
(Lloyd's India Regulations), paving the way for foreign reinsurers to set up branches in India and for Lloyd's to
establish a presence in India.
In December 2016 the IRDAI granted certificates of registration to five foreign reinsurer branches under the
Branch Office Regulations. The IRDAI also granted a certificate of registration to ITI Reinsurance Limited
(ITI) so that it could function as an Indian reinsurer alongside the GIC. Further, Lloyd's is in the process of
forming an India branch, along with various other foreign reinsurers which are looking to underwrite reinsurance
business through service companies set up in India under the Lloyd's India Regulations. In other words, the
coming months will see the emergence of several new types of player in this sector.
India as an international reinsurance hub
In economic terms, India is at a turning point in its history, experiencing a renaissance politically, commercially,
culturally. According to the World Bank, India is already the 3rd largest global economy in terms of Purchasing
Power Parity, behind China and the United States.
Most importantly, the new government has already demonstrated that it is open to economic reform - to
encourage business, to become outward looking and to modernize itself.
If India is to sustain and protect its economic growth - it must develop its insurance industry and integrate it
into the international industry. It is nobody’s case to choose between international insurance providers and a
local industry. India’s growth – as the country has commercialized and industrialised – will be jeopardised
unless the extraordinary risks it faces, particularly the risks from natural catastrophes, are mitigated.
36
a) Extraordinary risks India faces
According to the Asian Development Bank, Asia has borne about half of the estimated global economic cost
of natural catastrophes over the last 20 years. And it estimates that only 7.6% of Asia’s economic losses
were insured last year compared with 67% in the US.
According to Emdat data, in the thirty years between 1980 and 2010, India experienced 431 events which
killed a staggering 143,000 people. This is a terrible human tragedy, even more so, when added to the
economic consequences of these events. Almost 50 million people have been affected by natural disasters
in India in the past thirty years. The economic impact of these events has been calculated at $48bn. In a
soon-to-be released Lloyd’s study on the risk landscape of 300 cities over the next 10 years, Mumbai faces
a potential economic loss of US$47.38 billion from a combination of 20 key risks identified in the report.
In other words, the total amount that India as a country has lost to catastrophic events over a 30-year period,
will be the same amount that a single city like Mumbai, stands to lose in the next 10 years – if mitigation
measures to address its risks are not taken. Additionally, the types of risks that Mumbai is exposed to are
changing – while natural catastrophes such as flooding remains one of the top 3 risks for this city, man-
made threats are growing in prominence.
For example, the top risk that Mumbai faces in the future is the threat of a pandemic. In terms of overall
GDP figures, this single risk could impact US$11.44 billion of its GDP by 2025. This sum though will get
exponentially larger as India’s industrial and commercial infrastructure grows, as its buildings become more
expensive, and its businesses become more sophisticated.
So, this scopes out the challenge for the insurance and reinsurance industry – in large part, that is, to ensure
that as much of the economic impact as possible, is covered by the international insurance and reinsurance
industry - and not by the Indian taxpayers. This is – after all – what the industry is here for.
b) Inadequate insurance penetration
At present, non-life insurance penetration in India is under 1% of GDP - in fact 0.8% - which, while
comparing favourably to other states in the region such as Pakistan and Indonesia – which are both around
half this figure – is low when compared with markets such as Malaysia (1.7%) and Singapore (1.6%).
So, unless India enlarges its insurance industry and integrates more fully with the mature global markets,
insurance penetration will not increase to a comfortable level. The industry must keep up its penetration at
rates which surpass economic growth, or we will have assets being created which are simply not protected
for adequately. Lloyd’s research estimates that there is a global insurance gap of around US$170 billion in
terms of premiums - premiums which are needed to protect economies against their catastrophe exposures.
37
In a study of 42 countries, it was found that 17 of these countries were underinsured against their exposures
and eight of these countries were in Asia. India itself had an annualised premium gap of just under US$20bn
and that over 80% of its natural catastrophe losses remain uninsured.
So, while insurance penetration rates remain low, the burden falls on governments and taxpayers to fill the
gap. This will become unsustainable as the costs of natural catastrophes increase in the future. As a matter
of fact, the cost of global disasters has risen from an annual average of about US$50 billion in the 1980s to
close to 200 billion over the last decade.
There are many reasons for this including: increases in coastal populations, true of India - increasing value
of economic assets – urbanisation, and this is leading to areas with huge concentrations of assets,
infrastructure and people - and of course climate change. But the bottom line is that catastrophes are having
- and will continue to have – a greater economic impact than previously. There is of course, a virtuous
economic circle, which is created by good insurance.
If business is relieved of risk, it can hold less capital for protection purposes – creating capital efficiency –
or equally likely, it is able to invest that capital in productive businesses - leading to further growth. Putting
this in numerical terms, research shows that a 1% rise in insurance penetration translates into a 13%
reduction in uninsured losses, a 22% reduction in the taxpayers’ contribution following a disaster, and
increased investment equivalent to of 2% of national GDP.
c) India as an international (re) insurance hub
The international (re) insurers from well-regulated markets are a crucible for innovation for much of their
long history. They are, after all, the positive face of capital moving across borders – where international
funds are used to absorb shocks which could otherwise destabilize local communities. India wants to
establish itself as a hub for the region.
This could be an incredibly powerful driver for raising insurance penetration, but it will be a long and
difficult task to develop the right network of knowledge, capital and professional standards. But most of all,
it needs trusted relationships with others in the insurance community. Allowing foreign reinsurers to operate
in India, with an enabling regulatory framework, will help the country export its risk, and build greater
resilience and sustainability.
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CHAPTER 6
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 up to 31st march and
returns from Indian companies and state insurance funds received as of different dates are accepted up to the
date of finalization of accounts.
Arising out of the occurrence of disastrous like terrorist attack on world trade centre etc. which brought about
unprecedented 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 tariffs, 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 must be developed to set up a framework of the areas of co-
operation and the mechanism, with this India must 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.
39
What India needs to do?

Currently the non-life insurance industry in India is facing significant challenges. “We not only need to improve
the quality of our data base but also encourage sharing of data across industry and this requires standardization
which is really not happening at the pace warranted. The real time analysis of risk accumulations and exposures
is a desirable goal. Also, the country needs to be intensively modelled for all NAT CAT perils. The availability
of good quality human resource and talent to sustain the growth opportunity is a great challenge as insurance is
a service industry and manpower is a critical component of any service industry especially the financial
industry.”
India also aspires to establish itself as a global insurance centre of competence. It’ll be a long journey to develop
the right network of knowledge, capital, professional standards and trusted relationships.
Four steps have been suggested:
Step 1 – Legislative and administrative
Step 2 – Creation of a uniform (re) insurance regulatory framework for Branches, including the Special
Economic Zone
Step 3 – Creating the right ecosystem for the primary insurance market
Step 4 – Developing an international hub for Indian and Global clients
The required building blocks for the Indian Insurance industry to become a modern, transparent, progressive
framework and a global (re) insurance platform are
1. Primary legislation as directional and global in outlook
2. The framework for prudential regulations designed to give IRDA the authority – to draft and implement them
3. A calibrated shift from a rules-based regulatory frame work to a principles-based approach
4. To let the regulator set the tone to encourage sustained non-inflationary economic growth
5. To enable the regulator a sound and progressive global (re) insurance centre in India
6. Unleash market mechanisms as Self-Regulatory bodies
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Incentives to support the concept of (re) insurance hub in India would be very helpful; as it is important to help
India take advantage from already successful initiatives of Singapore and now Dubai. While tax incentive
(Dubai - all lines and Singapore - CAT) is outside the purview of the authority -- a platform to engage with
CBDT on this aspect can be an advantage. Creation of hub would not only support in wide-scale skill
development and leverage on vast Indian talent pool but would also help in developing India's primary insurance
penetration and overall premium grow out and improved risk management practices.
The opening of the market and insurance sector in specific has created a potential for the Indian companies
also to pool up bigger fund to support the capital-intensive sectors. The market must ensure that the domestic
companies increase their own capacities and introduce more strict guidelines as first – hand risk carriers.
Insurance companies must establish the business relations with their reinsurer to prevent them from
worldwide reinsurance cycle that effects 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: -
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Arising out of the occurrence of disastrous like Hurricance,terrorist attack on world trade centre etc. which
brought about unprecedented 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 reinsurers to hike the rates substantially and 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.
REINSURANCE UNDERWRITING
Reinsurance underwriting is the process of building up a portfolio of assumed risks; ii involves selecting the
accounts and defining the conditions/rates at which the accounts are to be accepted for assumption of risk. It
is one of the most vital functions of the management and the ultimate results of the company depend upon the
efficacy. Several arguments have been put forth as to whether underwriting is an art or a science in fact it
several traits of both – one must consider the previous results, make quantitative/qualitative analysis of the
results of the previous years. At the same time, it involves a g deal of the underwriter's intuitive judgment and
often his gut-feeling. In the long run it is the correct and positive dynamics of underwriting that decide the
success of a reinsurance company, just as much as that of an insurance company. Underwriting being a
function of such vital importance holds the key to the success of an organization. History is witness that very
rarely has a reinsurance company got into difficulties due to a poor investment decision, but a major
underwriting loss can critically impair the company and throw it out of business.
FACTORS THAT AFFECT REINSURANCE BUSINESS

For underwriting to be effective in the long run, a clear understanding of the reinsurance contract is essential
for both the parties. The cedent company needs this understanding to plan its risk-retention, types of
reinsurance required etc. For the reinsurer, it is necessary to plan for his portfolio, with an eye on the possible
accumulations of losses, underwriting a single large risk etc. After identifying the type of contracts that a
reinsurance company must underwrite during a period, it must identify the various sources of business that it
wants to get involved in. The different sources of reinsurance business are:
•Domestic direct underwriting companies
•Foreign direct underwriting companies
•Other reinsurance companies
•Reinsurance brokers
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Domestic business has various advantages like low acquisition costs, easy manageability etc and further it is
free from ether complications like adverse fluctuation of foreign exchange, economic instability of the country
etc. It suffers from the drawbacks of low volume and spread of business, which is essential to build up a stable
and profitable portfolio. Further, the expertise and experience of the reinsures that are spread across the globe
are also denied in case of domestic business. Or the other hand, overseas business has the advantages of wide
geographical spread, but the cost of maintenance may be higher. Further, other complications like difference
in language, legal systems, market practices and exchange control regulations may surface hence, a healthy
balance of domestic and overseas business will enable the reinsurer to develop a strong, stable and profitable
portfolio. Retrocession treaties among various reinsures could be a source of underwriting international
business with a balanced geographical spread. But the company should closely watch for higher costs o f
acquisition and low profitability. One possible solution to overcome these difficulties is to develop business
through intermediaries or brokers, subject to cost of brokerage, delays in remittances and underwriting being
in control. Another aspect which must be considered in finalizing a reinsurance contract is the class and spread
of risks. The reinsurance company will have to select risks depending on the size and intensity. A single
aviation portfolio may consist of a very small number of large risks, whereas there can be several small
household burglary accounts with limited risk exposure. Similarly, even within a class, mere can be variation
in risk exposure, like fire policy for residential dwellings as against that of a large industrial undertaking or
industrial complexes. Hence a proper balance will have to be struck between various classes; and within a
class, between various risks.
DESIGNING A REINSURANCE PROGRAM

Having decided a class and amount of business to be involved in, a company must decide some form of
reinsurance which it requires. Basically, the facultative form is more cumbersome, time- consuming and more
expensive. As such it is always wiser to consider a suitable combination of treaties.
The ultimate choice about a treaty, or a combination of treaties would depend upon whether the portfolio is
exposed to large individual losses or accumulation of losses from sporadic, isolated events. Apart from the
above, other considerations that have a bearing on a company's choice of portfolio are:
•Administrative costs and ease of operations.
•Effect on company's net retained premium income
•Whether it wishes to have reciprocal arrangements with other insurers.
In case of large risks on classes of business such as Fire, Engineering, Marine hull, etc., a surplus treaty
would be the best option for the cedent company as it would enable retention of a large part of premium
income. However, because of the special skills involved, a company might be inclined towards reinsuring
the business on a risk excess of loss. Further, the administrative hassles of maintaining a squibs treaty are
more as compared to those of quota share or excess of icss. It would also enable the company to attain a
higher rate of commission on a quota share treaty. The excess of loss treaty is also very beneficial in that it
is very simple to operate. The company after deciding on the amount of excess of loss cover protection need
not go for any reinsurance on individual risks. If the company is in the habit of issuing polici es for
43
unlimited liability (motor third party), the final layer of excess of loss cover should also be for an unlimited
amount.
An insurance company which is also involved in inward reinsurance can increase its capacity to accept large
reinsurance risks. However, to keep a check on its net retention, retrocession facility should be made use of.
Depending on its net retention ability, the company can retrocede the surplus amounts to retrocession Aires,
for which it may make use of the quota-share retrocession policy. For the protection of its net retained part
an excess loss cover would be useful. Need for reinsurance is paramount because a company must target the
maximum amount of business to ensure growth and achievement of its goals. However, while assuming high
amounts of risks it is possible for the growth to sustain large losses which may have an impact on the capital
reserves. To avoid this, an insurance company must necessarily go for reinsurance. Several obligatory treaties
can help achieve this requirement by providing automatic cover with minimum exclusion. Ii is particularly
useful for a new insurance company with a low retention capacity. While arranging for reinsurance, a
company must concentrate on good security of the reinsurer. Good security amounts to power of withstanding
any large risk and not the offer of large commissions and lower premium rates. Similarly, the rei nsurer also
judges whether the cedent company is worth entering into a contract with. Mutually, the two should decide
upon the level of reinsurance arrangements and the rates at which it is to be finalized.
RECIPROCAL BUSINESS
A company may seek reciprocal arrangement with another reinsurer to have a spread of its business and to
maintain a large volume of premium income, without affecting its solvency strengths. However, a totally
reciprocal arrangement (100%) is not possible and the reinsurance companies should aim at a mutually
agreeable balance.
For entering reciprocal business, a company should look for the following points.
• Companies with whom reciprocal business is being planned should be fundamentally strong, should
possess good business ethics, and should have a good history of treaties. Besides, a thorough knowledge of
the conditions of the country in which a party in is operating, is essential.
•The treaties proposed to be exchanged should be reasonably balanced with an acceptable ratio of
• Host of other services apart from providing reinsurance coverage
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CHAPTER 7
SOME IMPORTANT NEWS ON THE REINSURANCE INDUSTRY
Foreign reinsurers may get India access

Government May Allow Cos to Open Local Branches; No Move Yet to Allow PSU Insurers to Go Public
The Economic Times 24/05/2005
THE government may allow foreign reinsurance companies to set up branch offices in the country with
certain regulatory restrictions, according to a senior finance ministry official.
“This is one of the areas, where there is a broader political consensus with respect to foreign investment
in the insurance sector,” said joint secretary (banking & insurance) GC Chaturvedi after a seminar here on
Wednesday.
At present, foreign reinsurers are already allowed to set up representative offices in the country. However,
these outfits cannot underwrite business, which branches would be able to do.
The proposal to allow foreign reinsurers is one of the 113 amendments proposed in the IRDA Act and the
group of ministers (GoM) looking into this has already met thrice. The GoM is expected to meet again soon, he
said. Mr Chaturvedi also clarified that there is no move to allow public sector insurance companies to tap the
capital market to meet the fund requirement for their overseas expansion plans. “The general insurance
companies have reserves of over Rs 1, 000 crores, which was adequate to meet their overseas expansions plan,”
he said. As for Life Insurance Corporation (LIC), the government has given the corporation Rs 160 crore
exclusively for its foreign business. However, there could be some revisions to the norms for standalone health
insurance companies. There could be differential capital bases and the overall equity cap could be brought down
from Rs 100 crore to Rs 50 crore.
Earlier, speaking on the trends in the sector, PC James, member of IRDA, said that as the economy is
moving from an industrial economy to service economy, the need for risk cover on various services is increasing,
which, in turn, makes a strong case for more liability products. Already in FY07, liability products have recorded
the fastest growth, he said.
45
New India plans mortgage insurance JV
NEW India Assurance (NIA), the country's largest general insurer by premium income, plans to team up
with General Insurance Corporation (GIC) and National Housing Bank (NHB) to float India's first mortgage
insurance company, report Atmadip Ray & Debjoy Sengupta in Kolkata. NIA is in talks with potential partners
in the mortgage insurance JV. When contacted, NIA chairman and managing B Chakrabarti confirmed his
company is in discussions with other promoters on picking up stakes in the proposed JV. However, it is
undecided how much NIA will hold in the company. "A final decision is yet to be taken as there are regulatory
issues involving both Reserve Bank of India and Insurance Regulatory & Development Authority,” he said.
GIC Housing Finance, a subsidiary of the country’s only reinsurer GIC, is also slated to buy a tiny stake in the
proposed mortgage insurance company.
Global insurer’s capitalisation floor set at 5,000 crores

09/11/2007 The Economic Times
INTERNATIONAL reinsurers, looking to start operations in India, may soon be able to set up branches
with a minimum capitalisation of Rs 5,000 crore. This forms part of a set of amendments to the Insurance Act,
1938. The minimum capitalisation amount has been linked to the existing capitalisation of India’s only reinsurer,
General Insurance Corporation (GIC).
The amendments to the Act is pending before Parliament. Once the amendments are approved,
international reinsurers will have legal and regulatory clearance to open branches of their parent company to
transact business in the country. The Insurance Act only permits companies having a joint venture to sell
products in India. Currently, only 26% FDI is allowed in reinsurance sector. A joint venture company should
have a minimum capitalisation of only Rs 200 crore.
Reinsurance enables insurance companies to offload their risks by placing part of the cover with
reinsurers. Global reinsurance companies, including Swiss Re and Munich Re, are keen on setting up branches
in India, instead of coming through joint ventures.
“International reinsurers having branches in India will ensure that the liabilities of the branches will be
accountable to the parent company,” Swiss Re India managing director Dhananjay Date told ET. “Most
reinsurers are large enough to provide for claims arising from the mega insurance covers provided by the general
insurance companies. Stiff capitalisation requirements of Rs 5,000 crore will ensure that only serious well-
capitalised international insurers will be able to enter the market,” he added. “On the other hand, a joint venture
with Rs 200 crore would have been under capitalised and would not be able absorb huge claim pay-outs,” Mr
Date said.
46
The amendments to the Act also has provisions to recognise a ‘society’ for reinsurance. This will facilitate
UK’s Lloyd an entry into India. Lloyd’s is a society and not a company that underwrites reinsurance risks.
Under free-pricing, international reinsurers are cautious about underwriting practices adopted by
domestic insurance companies. However, with insurance companies in India being well-capitalised, it is
increasing their capacity to retain some of the smaller risks.
As the sole reinsurer in the domestic market, GIC receives a 20% statutory cession (20% of the premium)
on each policy subject to certain limits. Hitherto, the policy for international reinsurers was determined by
concerns about retaining capital within the country.
The omnibus insurance legislation is pending in Parliament since last year. The Left parties have raised
objections to several amendments, primarily the proposed hike in FDI in the sector from 26% to 49%.
Govt may cut reinsurance cap to 10%

02/01/2007 The Economic Times
AFTER getting their freedom in pricing, non-life insurers are set to experience freedom in reinsurance —
the process where an insurance company buys cover to transfer some risks out of its books.
Until now, insurance companies must mandatorily transfer 20% of their risks and consequently 20% of
their premium income to the General Insurance Corporation (GIC), which has been designated by the
government as the national reinsurer. Moves are afoot to bring down this compulsory reinsurance to 10% from
April 2007. For insurers, this would give them the ability to shop for best deals from international reinsurers.
However, for GIC, this would mean a loss of half of its captive business.
Industry officials say that public sector companies are likely to reinsure less since they are well capitalised
and, in a position, to retain risks. Private companies, with a smaller capital base, are likely to continue to
reinsure. However, they now have the choice of buying cover from international reinsurers. GIC, on its part,
will have to be more proactive in marketing its reinsurance services to companies. The Corporation has already
become more proactive in trying to get reinsurance business from developing countries and has opened offices
overseas, including the Middle East. It has also sought permission from the FSA in London.
Incidentally, no private player has come forward to set up a reinsurance company in India even after
liberalisation. This is because the economics of reinsurance supports having a giant corporation in financial
centre rather than distributing capital across countries.
The concept of compulsorily passing on risks (or ceding risks) to a national reinsurer was common in
most countries in the past. With liberalisation, most countries have withdrawn the requirement for compulsory
cessions. The objection to the removal of compulsory cession has been that this would result in flight of foreign
47
exchange as companies reinsure overseas, and secondly, policymakers felt that there was a need to increase
insurance capacity in India.
To ensure that there is no flight of capital; legislation has focussed on increasing retention of risks in the
country. While introducing the IRDA Act, the government had assured Parliament that the level of retention of
risks in the country would not go down upon liberalisation. However, with the economy witnessing large inflows
by way of investment, capital outflows are not a major concern. The concept of a national reinsurer was there
in most countries. With liberalisation, most countries have done away with the national reinsurer tag and allowed
free competition in the market.
CHAPTER 8
CASE STUDY
MUNICH RE – IN A WHIRLPOOL
Munich Re, the largest reinsurer in the world is facing a threat of getting trapped into a vicious circle.
Recently there has a downgrade in ratings by S&P that might lead to another downgrade if the company
resorts to inferior quality of business or less premium rates. The business has been
Tough for the company due to the ripple effects of 9/11 attacks coupled by dismal investment performance.
Von Bombard has recently assumed the position of CEO and has a daunting task of sailing the company out
of this storm.
Munich Re, the world’s largest reinsurer has reported losses of $680 million in e first-half of 2003 and its
rating is downgraded by SAP from AA- to A+ resulting Munich Re the lowest rated reinsurance company in
the European region. The ratings downgrade was on account of bad equity investments and its stakes in
Allianz, HVB and Commerzbank, whose performances were unsatisfactory. The company is facing a threat
that this ratings cut may be a trigger to get trapped in a vortex. Since the ability to attract new business is
reduced, a compromize either on quality of business or premium levels may lead to fall in profits which may
further lead to ratings downgrade. How will the new CEO Von Bomhard, take stock of this situation?
48
MUNICH RE – HISTORY
The insurance industry was initially triggered by the rapid commercial activity in Germany. Carl Thieme
started Munich Re in 1880 at a time when there was a sense of disappointment for insurance and reinsurance
companies in the country. The company was started in two rented rooms with five employees and a share
capital of three million marks. After eight years of its commencement it was quoted in the stock exchange and
its share capital was increased to 4.8 million marks. The number of staff also kept rising. It employed 55
people by 1890, 348 in 1900, 450 in 1914, 614 in 192O
The company faced its first tough time in April 1906 when an earthquake occurred in California devastating
the city of San Francisco. Around 3,000 people died and there was a property damage to the tune of 500
million dollars of which, 11 million Goldmark happened to be of Munich Re The prompt settlement of claims
fetched Carl Thieme the complement, “Thieme is money” instead of “time is money” from the clients This
event triggered the idea of reinsurance especially in. the US. It was the first company to prepare set of terms
and conditions for machinery insurance in 1900. In the 1930s, the company’s medical staff developed life
insurance manuals by the help of which it was possible to insure chronically ill who were considered
uninsurable until then. In 1970, it created a geo-sciences research group to analyze natural hazards covers
from a technical point of view. As of 2003, the company employs engineers and scientists from 80 different
disciplines meteorologists, geologists, geographers doctors, ships’ masters and experts with a wide range of
qualifications. Currently the company is the largest player in the reinsurance segment with competitors such
as Swiss Re and Berkshire Hathaway.
The Reinsurance Market
The origin of reinsurance can be traced to 14th or 15th century in marine insurance The concept of
reinsurance evolved when a single party found it difficult to insure high risks involving large payouts. In other
words insurance for the primary insure is reinsurance. It is mainly a tool to increase capacity enhance stability,
protection against catastrophes, obtain surplus relief to enable growth, gain underwriting ability and withdraw
from territory or line of business. Reinsurance is mainly classified under two categories; facultative and treaty.
A facultative contract is for a single risk and treaty is for multiple risks of certain type. 0ver years, reinsurance
industry has been handling various catastrophes such of Hurricane Andrew and successfully paying the
claims.
September 11, 2001 attacks at the World Trade Center had a big blow to insurance industry including the
reinsurers. The attacks resulted in insurance industry paying $40 billion as claims, two-thirds of which was paid
by reinsurance industry. This setback was coupled with the stock market losses trend following the attacks has
forced many reinsurers across the globe to revise their core business of reinsurance and withdraw from
49
businesses such as management, investment banking and also the lines business in which they specialize. With
the changed scenario the reinsurers cannot depend on investment income in their toughtimes. Days when
reinsurers could rely on cushion of investment income, or seek new markets to make-up for the stage in their
own are long gone Reinsurers now need to focus on delivering better more consistent underwriting results in
their core markets.
A BusinessWeek article mentioned that, “The pricing pressure is starting at top. Reinsurers, the large entities
such as Swiss Re and Munich Re that primary insurance carriers buy coverage from to reduce risk, have
upped their rates to recover capital reserves depleted by large September 11 claims and stock market losses.”
Another AON survey report for the year 2003 mentioned the views of reinsurance buyers, who expect that the
softening trends, which emerged over the course of 2003, will continue. In the same report, underwriters felt
that slight softening will continue in some lines of business but rates in others will be driven higher by
contracting supply.
The Current Problem of Munich Re
The company is facing troubles on various fronts. Firstly, the investment losses have been excessive. As
quoted by The Economist , “At the end of2001 Munich Re had 33% of its assets in equities; new, it has less
than 10%, Besides its stake in HypoVereinsbank (HVB), Munich Re owns one-fifth of Allianz, the company
situated at its neighbor in Koniginstrasse. Both holdings have lost more than 75% of their value in the past
three years.”
In March 2003, the company announced reduction of its cross shareholding with Allianz to about 15%. This
was a step taken to strengthen the capital base of Munich Re, since the performance of Allianz was not up to
the mark. The press release from the company said, “The effect of reducing shareholdings on both sides will
be that the respective participations are no longer valued at equity; consequently, Munich Re will in future
book the dividend of Allianz instead of the proportional result for the year in its income statement.
Furthermore, the groups’ free floats and thus the weightage of their shares in stock market indices will
increase.”
The news of Mr. Hans-Jurgen Schinzler’s retirement on April 28, 2003 was delicate considering the turbulent
times of the company. Mr. Schinzler who is 62 has to retire as per corporate Germany standards. The
company made profits in the year 2002 only because it sold €4.7 billion-worth of shares to Allianz. Un Mr.
Schjnzler the company initiated a diversification strategy. It shares 25 ownership in HVB, the country’s
second biggest bank. It also Owns 10% of Commerzbank, One of its subsidiaries ERGO is Germany’s biggest
primary insurer however it incurred a loss of €1.1 billion last year mainly due to investments these
circumstances when Mr. Bernhard has to takeover the charge, there was daunting task ahead of him.
50
Following that the biggest blow came with the ratings downgrade by S&P on account of weak profits and
reduced capital base. The company in pressrelease next day claimed the downgrade to be unjustified. The
company bragged of its AAA rating. A Business Week article commented “All the more so in the cloistered
world of reinsurance, where billions of dollars on corporate and private-risk coverage are guaranteed by a few
lop firms. The slightest slip in creditworthiness is a big blow, since it raises questions about the underwriter’s
ability to make good on claims when disaster This had put the company into a vicious circle where the
competitors had an edge over company due to ratings and hence it was tough to obtain new business, since
ratings have a large role to play in the business of insurance and reinsurance Secondly, this would force
Munich Re to lessen the premium in order to retain clients. A London insurance broker rightly commented,
“The big worry is that ratings cut can be the start of a vicious circle, you have to pay more for business as a
result, which means profits fall and your rating can get cut again.”
Future Outlook
On July 10, 2003 Munich Re became the first nationwide reinsurer in China after receiving the country-wide
operating license from China Insurance Regulatory Commission. This was an important move for Munich Re
to enter into high growth- oriented Asian market in testing times. Though the company had business
relationships with China through offices in Beijing, Shanghai and Hong Kong since 1956, this license opens
the door to an opportunity of an industry that has a double-digit growth rate.
With this backdrop the new CEO has the challenge to bring the company out from the vicious circle and continue
its image of the largest reinsurer in the world. At the time of succession of CEO the issues confronting the new
CEO are, how to come out of the loss-making investments of Munich Re at Allianz, HVB and Commerzbank?
How to retain the existing customers without straining profits? How to attract new business despite the ratings
cut? And finally, how to win the AAA rating by S&P, which it used to enjoy?
51
CASE 2
General Insurance Corporation of India
This case provides the history of General Insurance corporation of India (GIC’ since nationalization. GIC’S
role has been significant in the indian insurance industry and it is currently the sole national reinsurer. GIC is
also aspiring to be a global player in reinsurance. It is evolving itself as an effective reinsurance solutions
partner for the Afro- Asian region. In addition to that, it has also started leading reinsurance programmes for
several insurance companies in SAARC countries, South EastAsia, Middle East and Africa.
Insurance has always been a growth-oriented industry globally. On the Indian scene too, the insurance
industry has always recorded noticeable growth vis-a-vis other Indian industries. In 1850, the first general
insurance company, Triton Insurance Co. Ltd., was established in India and the shares of the company were
mainly held by the British. The first Indian general insurance company, lndias Mercantile Insurance Co. Ltd.,
was set up in 1907. After independence, General Insurance Council, a wing of Insurance Association of India,
framed a code c conduct for ensuring fair conduct and sound business practices in the area ct general
insurance. The Insurance Act was amended and tariff advisory committee was set up in 1968. In 1972, general
insurance industry was nationalized through the promulgation of General Insurance Business (Nationalisation)
Act. Around 55 insurers were amalgamated and general insurance business undertaken by the General
Insurance Corporation of India (GJC) and it subs Oriental Insurance Company Limited, New India Assurance
Company Limited, National Insurance Company Limited and United Insurance Company Limited.
The Indian insurance industry saw a new sun when the Insurance Regulatory. And Development Authority
(JRDA) invited the application for registration for insurers in August, 2000. General Insurance Corporation of
india and subsidiaries have been the erstwhile monarch of non-life insurance for almost three decades. After
donning the role of ‘the national reinsurer’, by GIC, delink of its subsidiaries and entry of foreign players
through joint ventures have changed the outlook of the whole general insurance industry and forced GIC to
enter arena of competition.
GIC and its four subsidiaries functioned through a huge network of 4,167 offices spread cross the country.
The main customer interface for these units were in agents, development officers and employees at branch,
divisional and region. offices in various parts of the country. The total workforce of GIC and its subsidiaries
was around 85,000. GIC has made a huge contribution to the overall development of the nation, through
investments in the socially-oriented sectors. The Government of India had entrusted to, GIC, the
administration of various social welfare schemes, such as personal accident insurance and hut insurance
schemes operated all over the country.
52
in addition to this, its joint ventures in the form of GIC mutual fund and GIC housing finance have contributed
not only to the development of the nation but also to the income growth of the corporation. GIC’s net
premium and investments stood at Rs.1,710.26 crore and Rs.4,556.5 crore as of March 31, 1999. During the
same period, the capital and funds of the Corporation stood at Rs.2,914.64 croré.
History — How was it Formed?
The general insurance industry was nationalized through General Insurance Business (Nationalization) Act,
1972 (GIBNA). The Government of India took over the shares of 55 Indian insurance companies and 52
insurance companies carrying on general insurance business. GIC was formed in pursuance of Section 9(1) of
GIBNA. Incorporated on November 22, 1972, under the Companies Act, 1956, GIC was formed for the
purpose of superintending, controlling and carrying on the business of general insurance. After the formation
of GIC, the central government transferred all the shares held by it of various general insurance companies to
GIC, Thus, after the whole process of mergers and acquisitions in the insurance industry, the whole business
was transferred to General Insurance Corporation and its four subsidiaries.
Among its four subsidiaries, National Insurance Company was incorporated in the year 1906. As a subsidiary
of the GIC, it operates general insurance business in India with its head office located at Kolkata. New India
Assurance Company was formed in the year 1919 and operates general insurance business in India with its
head office at Mumbai. New India Assurance company is considered as the most successful company in the
field of general insurance. Oriental Insurance Company was established in the year 1947 and its head office is
located in New Delhi. United India Insurance Company operating its general insurance business with its head
office at Chennai.
53
CONCLUSION
Although reinsurance is widely used by the underwriters of health benefits (i.e., insured and self-funded plans),
its role is little understood by policymakers. Reinsurance plays important roles in the health care markets that
we considered. Primary insurers (including self-funded plans) reduce their risk exposure in ways that can effect
the availability and affordability of coverage. Reinsurance also plays an important role in how primary insurers
and HMOs assure their financial stability and meet minimum capital requirements imposed by states.
The potential role of reinsurance has been an important topic in several recent policy debates. State insurance
regulators have raised concerns that certain stop loss arrangements are being used to help small employer health
plans avoid state insurance reforms. Reinsurance also has been suggested as a potential vehicle to assist provider
sponsored health plans and multiple employer benefit arrangements demonstrate financial adequacy.
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 to resolve.
54
BIBLIOGRAPHY
BOOKS :
 Principal of insurance management, 1st Edition, Author – Neelam C. Gulati, chapter 17, Reinsurance,
Pg No. 227 to 248
 Insurance Theory and Practice, 3rd Edition, Author – Nalini Prava Tripathy & Prabir Pal, chapter 9,
Reinsurance – Global Environment and Indian challenges, Pg No. 89 - 103
WEBSITES :
 WWW.IRDA.com
 WWW.OUTLOOKMONEY.com
 WWW.INSURANCETRANSLATION.com
 www.indiainfoline.com
Newspapers, Magazines & Journals

The Economic Times
Mint
The Times of India
Business Standard
Business Today
Business line
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Reinsurance in India

ORIGIN AND DEVELOPMENT OF REINSURANCE: -

THE FIRST INDEPENDENT REINSURANCE COMPANY; -

FIRST RECORDED REINSURANCE CONTRACT: -

1) To limit liabilities on specific risks

(1) RISK TRANSFER

(2) INCOME SMOOTHING

(3) SURPLUS RELIEF

(5) REINSURER’S EXPERTISE

(6) CREATING A MANAGEABLE AND PROFITABLE PORTFOLIO OF INSURED RISKS

(7) MANAGING THE COST OF CAPITAL FOR AN INSURANCE COMPANY

Risk capital improvement and diversification

Financing new business

Other reinsurance needs and a word of warning

Surplus or excedent reinsurance

Excess of Loss reinsurance

Stop loss reinsurance

Catastrophic excess of loss reinsurance

 The pricing of non-proportional reinsurance is an involved activity that is done by

 In non-proportional reinsurance the typical duration of an agreement is annual since

Results of Reinsurance Department Operations

Retention of adequate capacity within the country

Participants of the reinsurance industry

Regulatory and supervisory issues

Accounting and control issues

Understanding a reinsurance treaty

 Who is the reinsurer? Is it a strong reputable company?

 Is there an arbitration clause to settle disputes?

Some standard terms of a reinsurance treaty include:

Non-utilisation of capacity of terrorism pool

Delay in collection of Reinsurance Premium in GIC

Delay in receipt of adjustment premium

Cessions based on Probable Maximum Loss

Rates of reinsurance commission on outward cession

Placement of business with reinsurers

Information flow from the regional offices

Recoverable from reinsurers

Settlement of balances and rendering of accounts

India as an international reinsurance hub

a) Extraordinary risks India faces

b) Inadequate insurance penetration

c) India as an international (re) insurance hub

What India needs to do?

FACTORS THAT AFFECT REINSURANCE BUSINESS

DESIGNING A REINSURANCE PROGRAM

Foreign reinsurers may get India access

New India plans mortgage insurance JV

Global insurer’s capitalisation floor set at 5,000 crores

Govt may cut reinsurance cap to 10%

The Reinsurance Market

The Current Problem of Munich Re

History — How was it Formed?

Newspapers, Magazines & Journals

The Times of India

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