On May 7, 2025, the CEOs of several leading general and health insurance firms will convene with M Nagaraju, Secretary of the Department of Financial Services. The primary agenda for this meeting is to discuss the 4% obligatory cession of their business to the General Insurance Corporation of India (GIC Re).
This term ‘cession’ signifies the percentage of insurance premiums that insurers must transfer to a reinsurer, in this instance, GIC Re.
In FY24, the Insurance Regulatory and Development Authority of India (IRDAI) upheld the mandatory cession in favor of GIC Re at 4%, a decision that has garnered mixed reactions from the industry.
While GIC Re has seen significant financial gains through this arrangement, private sector insurers have voiced concerns over its effect on operational autonomy and profitability. In FY24, GIC Re, India’s foremost reinsurer, collected approximately ₹1,500 crore in obligatory premiums. However, the mandatory cession continues to be a point of contention among private insurers who argue that it limits their freedom to work with other reinsurance providers and decreases their earning potential from commissions.
The upcoming meeting with Secretary Nagaraju is anticipated to address these concerns and consider modifications to the existing cession policy. The outcomes of this discussion will significantly impact the dynamics of the Indian reinsurance market, making it a topic of great interest among industry stakeholders.
