India’s IRDAI retains obligatory cession to be placed with GIC Re at 4% for FY’26

For the third year in a row, the Insurance Regulatory and Development Authority of India (IRDAI) has retained the ‘obligatory cession,’ which is the portion of business that Indian non-life insurers must mandatorily place with state-owned General Insurance Corporation of India (GIC Re), at 4% for financial year (FY) 2026.

In a press release, Irdai stated, “The percentage cession of the sum insured on each General Insurance Policy to be reinsured with the Indian Re-insurer(s) shall be 4% (four percent) in respect of insurance attaching during the financial year beginning from 1st April, 2025 to 31st March, 2026, except the terrorism premium and premium ceded to Nuclear pool wherein it would be made ‘NIL’. The entire Obligatory Cession is to be placed with General Insurance Corporation of India (GIC Re) only.”

Certain business lines have a different obligatory cession, outlined by the regulator as follows: a minimum of 5% for motor third-party and oil and energy insurance; 10% for group health insurance; 7.5% for crop insurance; and a minimum of 15% for all other classes of insurance.

GIC Re’s share of revenue from obligatory business was 39% in April–October of FY’25 compared to 43% in FY’24, while non-obligatory business accounted for 61% for FY’25.

The share of obligatory business shows a big hike from 30% in FY’21.

The regulator has also confirmed that commissions above the specified threshold mandated by IRDAI can be mutually agreed upon between the Indian reinsurer and the ceding insurer.

Meanwhile, there has been a long-standing demand from non-life insurers to bring down the ‘obligatory cession’ to 0%, as the commission paid by the reinsurer does not reflect the industry’s cost structure.

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