The Insurance Regulatory Development Authority of India (IRDAI) has issued a notification regarding the Obligatory Cession for the financial year 2023-24. This notification was issued on 1st February, 2023.
The notification will be applicable to Indian Re-insurers and other applicable insurers.
The notification states that the percentage cession of the sum insured on each General Insurance Policy to be reinsured with the Indian Re-insurer(s) shall be 4% in respect of insurance attaching during the financial year beginning from 1st April, 2023, to 31st March, 2024. The exception to this will be the terrorism premium and premium ceded to Nuclear pool wherein it would be made ‘NIL’. The entire Obligatory Cession is to be placed with the General Insurance Corporation of India (GIC Re) only.
There would be no limit on the sum insured applicable for the cessions made from 1st April, 2023, to 31st March, 2024.
Hence, the Indian Reinsurer may require the ceding insurer to give immediate notice of underwriting information of any cession exceeding an amount as specified by the former. The ceding insurer shall inform the Indian Re-insurer at all times whenever the cession exceeds such specified limits.
The Percentage of commission on obligatory cession for different classes of business will be:
i) Minimum 5% for Motor TP and Oil & Energy insurance.
ii) Minimum 10% for Group Health insurance.
iii) Minimum 7.50% for Crop Insurance
iv) Average Terms for Aviation Insurance
v) Minimum 15% for all other classes of insurance business. Commission over and above can be as mutually agreed between Indian Re-insurer(s) and the ceding insurer.