← Policy & Regulation: Financial & market regulation (all topics)
Obligatory cession (GIC Re)
What it is
Every Indian general insurer must cede a fixed share of each policy it writes to the national reinsurer, GIC Re, at terms set by regulation rather than negotiated in the market. The percentage is reviewed periodically and has been reduced over time
It guarantees the national reinsurer a baseline book and keeps reinsurance premium within the country
Impact on industries
- Retains reinsurance capacity and foreign exchange onshore, giving the national reinsurer scale to underwrite large Indian risks
- For the ceding insurer it is automatic capacity - a portion of risk transferred without negotiation, which helps smaller players manage capital and volatility
- Compulsory cession at administered terms removes choice - an insurer with a well-performing book still surrenders a share of its best business rather than retaining the profit
- Cuts to the obligatory percentage let insurers retain more risk and margin, so each revision shifts economics toward the direct market