In a surprise move, IRDAI has relaxed the disclosure requirements of foreign reinsurance branches (FRBs) and Lloyd’s India as part of “rationalisation of compliance” standards.
The regulator said FRBs and Lloyd’s India are now exempted from disclosing financial details and underwriting performance through NL40 format. However, according to experts, the latest measures will lead to opaqueness in the functioning of reinsurance branches in India.
IRDAI said FRBs and Lloyd’s India need not publish the half yearly and annual revenue account, profit & loss account, balance sheet and analytical ratios as mandated in the captioned circular in the newspapers. “However, they may continue to publish a true and accurate abstract of the various returns for the purpose of publicity on a voluntary basis pursuant to provisions of Section 25 of the Insurance Act, 1938,” it said.
FRBs and Lloyd’s India provide reinsurance support to the direct insurers and the insurers do conduct their due diligence on the FRBs while entering reinsurance contracts with them, IRDAI said. “The necessary information on financials is also made available through public disclosures on the respective website of the FRBs. Reinsurance business is B2B segment and the policyholders do not deal with the reinsurers,” it said in a circular to the CEOs of insurance companies.
“Transparency is equally important. Discontinuing uploading NL40 appears to be a retrograde step in this era of transparency. Whether the FRBs in India have provided any significant advantage to the market as compared to the services rendered by international reinsurers who do not have a branch India is a matter that requires frank study and analysis,” said former IRDAI Whole-time Member KK Srinivasan.
