Money & Banking

Reinsurance firms approach IRDAI for separate set of accounting norms

Surabhi Mumbai | Updated on February 06, 2019 Published on February 06, 2019

Insurance companies are required to commence their annual reinsurance programme at the beginning of every financial year, starting April 1 tumsasedgars

Reinsurance companies have approached the Insurance Regulatory and Development Authority of India (IRDAI) for a separate set of accounting and reporting norms for the industry.

Same norms used

At present, re-insurers in the country, including state-run General Insurance Corporation of India, use the same reporting norms prescribed by the regulator for insurance companies.

“The industry has been in talks with the IRDAI on a separate set of guidelines for re-insurers for reporting, accounting and end-use,” said an executive with a foreign reinsurance company.

Apart from GIC, there are nine foreign re-insurers that have set up operations in the country with branch offices. These include Swiss Re, Lloyd’s India, and Allianz Global Corporate and Speciality.

The discussions come soon after the IRDAI eased rules for foreign reinsurers to create a more level playing field with GIC.

While the state-run reinsurer continues to have the first right of refusal, foreign reinsuers can bid for the contracts and win if they quote lower prices.

Still a few years away

However, foreign reinsurers say that while the development is welcome, it will still take a few years for the system to settle down.

Experts believe a separate set of reporting guidelines are necessary for reinsurers, as their nature of business and cashflows is different.

“The business of reinsurance is different from that of insurance, and so the reporting norms have to be different.

“For example, the cost of acquisition, or the way the costs are divided or premium is treated is different.

“The insurer gets the money as soon as the risk is underwritten, the reinsurer gets the money quarterly in an aggregated form,” said Joydeep Roy, Partner - Leader, Insurance and Allied Businesses, PwC India, adding that the accounting needs to be tailored to reinsurance to help present the true picture of their accrual of risk and premium.

Published on February 06, 2019
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