Moody’s Investors Service, on Wednesday, said the new regulations for re-insurance in India are credit-positive. “They will improve Indian insurers’ access to a broader reinsurance base, which will support their management of underwriting risk and performance,” it said.

The Insurance Regulatory and Development Authority of India (IRDAI) recently notified new norms under which the reinsurer General Insurance Corporation (GIC) will continue to have the first right of refusal. But in a break from the past, it will be required to simultaneously seek terms from at least four foreign reinsurance branches, allowing non-Indian reinsurers to compete for business on equal terms with Indian reinsurers.

This is a change from the earlier norms where Indian reinsurers have the first preference and right of refusal. Non-domestic reinsurers are offered business only if Indian reinsurers refuse the business.

“IRDAI’s new reinsurance regulations are another step to liberalise the reinsurance market, and were preceded by admitting foreign-based reinsurers to India’s market,” said Moody’s, adding that it will provide local insurers broader access to foreign reinsurers and encourage them to sharpen their use of reinsurance as a risk management tool to reduce P&L and balance sheet volatility.

It noted that new reinsurers may be selective in writing business with local primary insurers. But primary insurers that are able to partner with them will add sophistication to their underwriting and enhance their underwriting skills.

“This credit-positive development is timely, since it will allow Indian insurers to reap greater benefits from India’s strong economic expansion and will increase the take-up of insurance, which is set to benefit from the September 2018 launch of universal health coverage,” added Moody’s.

India’s reinsurance market, according to industry estimates, is worth ₹45,000 crore to ₹50,000 crore.

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