Irdai to allow insurers to auto renew FRN of cross border reinsurers

Move aimed at improving ease of doing business; reinsurers must first meet regulator's criteria for obtaining renewal, which would be available FY24 onwards

The Insurance Regulatory and Development Authority of India (Irdai) has decided to consider allowing domestic insurance firm to auto renew the file reference number (FRN) of cross-border reinsurers (CBRs), provided that the CBRs meet the criteria laid down by the regulator for obtaining such a renewal. Currently, FRNs are allotted by the insurance regulator on an annual basis.

The CBRs play a significant role in the insurance ecosystem by providing reinsurance support/capacity to insurers. An insurer has to ensure that the CBR meets, inter alia, the rating requirements under Irdai (Reinsurance) Regulations, 2018 and acquires the FRN, before placing any business with it, the regulator said in a circular.

“After considering the feedback and inputs from the task force on non-life insurers and reinsurers, and the working group on ease of doing business, it has been decided to consider auto-renewal of FRNs by the insurer itself, provided such CBRs meet the required criteria as specified hereafter,” the regulator said.

This is in line with the regulators’ vision to provide ease of doing business to insurers and reinsurers so as to facilitate the development of the insurance industry in the country.

The facility for auto-renewal would be available for FY24 and beyond.

Under Irdai guidelines, an insurer can generate FRNs on its own for the CBRs that qualify for auto-renewal. Those CBRs that do not qualify, would have to obtain FRN on an annual basis.

In order to generate FRNs for qualifying CBRs, insurers have to ensure that the latter's credit rating is not less than Standard & Poor's A- or equivalent. Also, the CBR's latest credit rating should not be prior to 12 months from the date of application for auto-renewal. Further, an insurer must ensure that CBR has been allotted an FRN by the authority in the financial year preceding the one for which the application has been made.

For fresh file registration numbers, CBRs that meet the eligibility criteria under the extant regulations would qualify as ‘Eligible CBRs’ while those who do not qualify would be classified as ‘Non-Eligible CBRs’.

Consequently, any insurer wishing to place reinsurance business with a CBR would have to file an online application with Irdai at the CBR portal, for have the FRN allotted to the reinsurer under the above two categories. After examining the insurer's submissions, the regulator would allot a system-generated FRN.

Irdai has clearly specified that insurers cannot place reinsurance business with any CBR without a valid FRN. And, once an FRN is allotted to a particular CBR, it shall not be used by another insurer for placement of reinsurance business with such CBRs.