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Assess resilience of reinsurers for risk concentration: RBI

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There is a need to assess the resilience of reinsurance companies, with increasing concentration of contingent liabilities in some, says the Financial Stability Report. If major ‘ risk events’ happen simultaneously, these companies might come under heavy stress.
Which could create big problems, including a risk of insolvency, for primary insurance companies, it said.
Reinsurance is where primary insurance companies themselves buy insurance for the risks they cannot retain entirely with themselves, from one or more insurance companies ( reinsurers).
There is only one reinsurer in the country, the General Insurance Corporation of India ( GIC Re), owned by the government. GIC Re reported a solvency ratio of 3.04 at end- March 2015 ( 2.73 a year before this). However, foreign reinsurance entities also do business here, though they have no branch presence. The report’s reference is to these, too.
Many foreign reinsurers have applied to the sector regulator for a branch presence in the country. The new insurance laws have allowed this but there is a new norm ( to be reviewed after 12 months) that first preference for treaties will be given to GIC Re.
Business Standard New Delhi, 29th April 2016

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