• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Sarbajeet K. Sen

``Rs 200 crore capital is peanuts for a reinsurance company. Even double that is inadequate. What we need is a legal and regulatory framework that allows foreign reinsurance companies to operate in the Indian market by opening branches,'' Mr Dhananjay Date, Managing Director, Swiss Re India, says.

New Delhi , Sept. 22

IF global reinsurance majors have their way, there might never be a second Indian reinsurer to give company to the General Insurance Corporation (GIC), the sole reinsurance company on Indian insurance turf.

A section of the foreign reinsurers are now lobbying with Indian authorities to do away with the legal pre-requisite of promoting a joint venture company to enter the Indian insurance market. Instead, they are seeking legal and regulatory approval to be allowed to open branches of the parent company to transact business in India.

Taking the lead in making the demand is one of the largest global reinsurance companies - Swiss Re - which has pointed out to the Insurance Regulatory and Development Authority (IRDA) that the requirement of floating a joint venture company with Rs 200 crore minimum paid-up capital would lead to setting up "highly inadequately capitalised" entities that would not be able to take the hit if major losses arise on account of claims arising from the mega insurance covers provided by the primary non-life insurance companies.

Reinsurance enables primary insurance companies to spread out their risks by placing part of the cover with these companies. Incidentally, not a single private sector reinsurance company has been formed in India till date mainly due to uncertainties on the depth of the insurance market and the unwillingness on the part of Indian promoters to pump in their stipulated 74 per cent share of the Rs 200 crore capital.

Laws permit the foreign partner a maximum of 26 per cent share of the capital.

``Rs 200 crore capital is peanuts for a reinsurance company. Even double that is inadequate. What we need is a legal and regulatory framework that allows foreign reinsurance companies to operate in the Indian market by opening branches,'' Mr Dhananjay Date, Managing Director, Swiss Re India, which is registered as a service company, said.

Mr Date said he had already made his company's views known to the IRDA Chairman, Mr C.S. Rao, who he said appeared to be "very receptive" to the arguments.

Swiss Re has argued that the liabilities of the reinsurance cover provided by the branches would actually fall on the parent company that would have sufficient financial muscle at all times to meet any amount of losses.

``The mega risks or calamities might require payments of thousands of crores. Only the global companies can meet such huge reinsurance commitments. It is in the best interest of the Indian insurance market to allow setting up branches,'' Mr Date said.

He also said with the primary life and non-life insurance business having stabilised in the country, it was now "the time to look into reinsurance" since the companies were transacting large business that required prompt and adequate reinsurance covers.

Article E-Mail :: Comment :: Syndication

Stories in this Section
Madras HC Bench stays order on IOB staff dismissal

Copyright © 2003, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line