The Indian reinsurance sector — the business of general insurance companies passing on risk to reinsurance firms — is not tightly controlled as otherwise made out to be. Yogesh Lohiya, chairman of the state-owned General Insurance Corporation of India, complains that there’s no level playing field in the reinsurance segment as foreign reinsurance companies are allowed to do business here without much restrictions while domestic players are tightly regulated by the Insurance Regulatory and Development Authority (Irda).

On the contrary, when Indian companies set shop in other countries, they are asked to pay margins and a portion of premium as security, the GIC chief said.

According to Lohiya, “in the reinsurance business in India, there’re no restrictions. This is what we have been telling the regulator. Why this step motherly treatment to us? Suppose they (foreign companies) run away after taking premium, Irda has no control over them. All rules apply to me but not to them,”

In India, insurance companies have to follow the investment guidelines prescribed by the regulator.

“All Irda rules apply to me. I have to invest as per Irda regulations. When they (foreign reinsurers) take the premium, the money goes out. Suppose there’s a claim and the company doesn’t pay. What will you do. You have to go abroad and file a case. It’s a costly affair,” Lohiya said.

“Let’s take a country like the US which is considered a free market. When we go there, we have to give a security to do business. When I go there, I have to take bank guarantee. When they do business here, there’s nothing like that,” Lohiya said.

Many US and European reinsurers are quite active in India. In the fiscal 2010-11, nearly 9 per cent of the premium was taken away by foreign reinsurers.

“Take the example of Malaysia. They keep 10 per cent of premium as security. When they come here, there’s nothing. In a country like Singapore, we give a certain percentage for doing business there,” Lohiya said.

GIC, the 16th largest reinsurance firm in the world, is the largest in India.

According to the GIC chief, anybody can do business here as there’s no bar for reinsurers in India. “The market is open. Every other country specifies some guarantee or some restrictions. Every country is day by day tightening things. It’s not easy when we go abroad for business,” Lohiya said.

Foreign reinsurers are registered and regulated in different jurisdictions where the Irda has no control.

When asked about the amount being taken out of the country, Lohiya said, “it’s not a question of big or small. It’s a question of the country’s safety. Here, if GIC doesn’t pay up, the claimant can go to the regulator who can ask us. We have to be careful. It’s insurance business.”

IRDA‘s reinsurance norms say that “every insurer shall maintain the maximum possible retention commensurate with its financial strength and volume of business.”

The authority may require an insurer to justify its retention policy and may give such directions as considered necessary in order to ensure that the Indian insurer is not merely fronting for a foreign insurer, Irda says.

The insurance regulator’s new reinsurance norms are yet to come out.