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IRDA has lowered the obligatory cession on each general insurance policy which has to be reinsured with GIC to 4% from the earlier 5%.
The companies buy reinsurance to secure their balance sheet. In order to mitigate the risk, companies buy the obligatory reinsurance from the state-owned GIC Re, which is the national reinsurer. This act of transferring the risk to the reinsurer is called cession; in exchange of this GIC charges a premium amount.
In 2020-2021 the Indian general insurance sector had a market size of over Rs.2 Lakh crore. It had a steady growth of about 15% every year except for the previous two years during which the industry suffered various difficulties due to Covid-19. During these pandemic years, the growth had fallen to 10 %. In the financial year 2020-2021, the Indian reinsurance market is valued at around Rs. 55,000 crores.
Obligatory cession to GIC Re reduced to 4% from FY 23: IRDA
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