Ratings agency Moody’s Investors Service said on Wednesday that the insurance regulation that mandates first right of refusal to Indian reinsurers is credit positive.
“The regulations will take effect in January 2019 and are credit positive for the Indian insurance industry because they will improve Indian insurers' access to a broader reinsurance base, which will support their management of underwriting risk and performance,” the ratings agency said.
There is only one domestic re-insurer, GIC Re, in the Indian reinsurance market which is pegged at $6.3-$7 billion.
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Indian reinsurers will retain the first right of refusal but are required to simultaneously seek terms from at least four foreign reinsurance branches, according to the new regulations. This will allow non-Indian reinsurers to compete on equal terms with Indian reinsurers.
“IRDAI’s new reinsurance regulations are another steps to liberalise the reinsurance market and were preceded by admitting foreign-based reinsurers to Indian market,” Moody’s Investors Service said.