Opening up the Indian reinsurance market to new players, the Insurance Regulatory and Development Authority of India (IRDA) has given its initial approval, known as R1 in regulatory parlance, to four global players — Munich Re, Hannover from Germany, Swiss Re from Switzerland and French major SCOR.
Confirming the development, a senior IRDA official said that after providing the R1 clearance, the regulator now is conducting the due diligence for granting the final approvals (R2) to these global reinsurers to set up direct operations in the country and the process may take some time.
Munich Re is the largest reinsurance player in the world while Swiss Re is the second largest and Hannover comes third in global size.
After the IRDA had announced its reinsurance regulations in November 2015, six global reinsurers, which have been doing their business offshore, have already applied for the license to set up branch operations in India.
Two more international players, US based Reinsurance Group of America (RGA), an exclusive life reinsurance player and UK-based XL Catlin are waiting for the R1 clearances from the IRDA.
While normal insurers need three stages of clearances, reinsurers have to get only two levels of approvals.
Lloyd’s of London is also waiting in the wings for approval but the IRDA is yet to finalise the guidelines for Lloyd’s which functions as an insurance market.
Initially, all these players were under the impression that they would receive their licenses before April 1 and kick-start their direct India business by participating in the annual renewal exercises in the country that happens in March end.
However, the IRDA had revised its earlier norms for giving a special status to the state-owned GIC Re which will have the first right of refusal over other reinsurers for any Indian business.
The process to revise the norms has delayed the exercise to grant licenses to the global reinsurers. It is now expected that these reinsurers may get their licenses to operate in the Indian market by July-August and will start their operations in September-October. As of now, GIC Re is the only reinsurer registered in India.
Meanwhile, IRDA has notified that the new regulations on the functioning of the Indian reinsurance markets with the participation of new players will be suspended until further orders.
The regulations had specified how the primary insurers, which have dealings with only with one Indian reinsurer GIC Re so far, will deal with many reinsurers.
As the new players are yet to get their licenses, the regulations have been put off for sometime, said a senior official from IRDA.
Many foreign insurance players have hiked their stake in Indian joint ventures to 49 per cent, the maximum permissible stake allowed in an Indian insurance firm as per the amended Insurance Act.
AIA Group said it will increase its shareholding in Tata AIA Life Insurance Company, a joint venture company by Tata Sons and AIA, from the current level of 26 per cent to 49 per cent.
Earlier, foreign partners in Aegon Religare, Birla Sun Life and Reliance Life Insurance also hiked their stakes to 49 per cent while ICICI sold small stakes in its insurance ventures.
Another three or four companies, including SBI Life, are likely to announce a hike in foreign stakes in the near future.