IRDAI Prescribes 4% Obligatory Cession for FY 2026-27 Under Section 101A of the Insurance Act, 1938

The Insurance Regulatory and Development Authority of India (IRDAI) has formally notified the Obligatory Cession framework applicable for the financial year 2026-27. Issued from Hyderabad on 9th April, 2026, bearing reference F. No. IRDAI/RI/3/217/2026, this notification has been promulgated in exercise of powers granted under Sub-section (2) and (4) of Section 101A of the Insurance Act, 1938, following due consultation with the Advisory Committee constituted under Section 101B of the Insurance Act, 1938, and with the prior approval of the Central Government.

The notification carries significant implications for the domestic reinsurance ecosystem, particularly for general insurers operating in India, as it defines the mandatory proportion of risk that must be retained within the country's reinsurance framework.

Governing Provision

The notification derives its authority from Section 101A of the Insurance Act, 1938, which empowers IRDAI to prescribe the percentage of sum insured that every insurer must cede to Indian reinsurers. This legislative mechanism is designed to strengthen India's domestic reinsurance capacity and reduce dependency on foreign reinsurance arrangements.

Who Does It Apply To?

The notification is binding upon:

  • Indian Re-insurers as defined and recognised under the Insurance Act, 1938
  • Other applicable insurers falling within the scope of Section 101A of the Insurance Act, 1938

All general insurance companies writing policies that attach during the period 1st April, 2026 to 31st March, 2027 are required to comply with the prescribed cession requirements.

Prescribed Rate of Obligatory Cession

The 4% Mandate

At the heart of this notification lies a clear and unambiguous directive:

Every general insurer is required to cede 4% (four percent) of the sum insured on each general insurance policy to the designated Indian Re-insurer, in respect of all policies attaching during the financial year 1st April, 2026 to 31st March, 2027.

This rate remains consistent with the approach followed in the preceding financial year, reinforcing regulatory continuity while sustaining the domestic reinsurance market's role in absorbing risk.

Designated Reinsurer

A critical aspect of this notification is the exclusive channelling of all obligatory cessions to a single entity:

The entire Obligatory Cession is to be placed with General Insurance Corporation of India (GIC Re) only.

This designation underscores GIC Re's position as India's premier domestic reinsurer and the central pillar of the country's obligatory cession regime.

Exclusions from the Cession Requirement

Not all premium streams are subject to the 4% obligatory cession. The following are explicitly carved out, with the applicable cession rate being treated as NIL:

  • Terrorism Premium — cessions under terrorism covers are excluded
  • Nuclear Pool Premium — premiums ceded to the Nuclear Pool are similarly exempt