On May 7, 2025, executives from prominent general and health insurance companies will meet with M Nagaraju, the Secretary of the Department of Financial Services, to discuss a contentious issue: the mandatory 4% cession of business to the General Insurance Corporation of India (GIC Re).
Cession is the portion of insurance premiums that insurers are obligated to pass on to a reinsurer. In this case, it refers to GIC Re, the public sector reinsurer. However, private sector insurers have raised concerns about this arrangement’s impact on their operational flexibility and profitability.
The Insurance Regulatory and Development Authority of India (IRDAI) decided to maintain the mandatory cession at 4% for FY24, a decision that has sparked a mix of reactions within the industry. Despite GIC Re benefiting significantly from this arrangement, accumulating nearly ₹1,500 crore in obligatory premiums during FY24, private insurers argue that it restricts their ability to place reinsurance business with other providers and reduces their commission earnings.
The meeting with Secretary Nagaraju offers an opportunity to address these concerns and potentially modify the current cession policy. The outcome of this discussion will significantly impact the dynamics of the Indian reinsurance market, as any changes could reshape the landscape of this sector.
