The Insurance Regulatory and Development Authority of India on 8th September 2021 has proposed separate guidelines to regulate the Surety Insurance business. The objectives of the proposed guidelines are to promote and regulate sustainable and healthy development of Surety Insurance Business in India.
As per the guidelines, All Insurers registered under the insurance Act, 1938 to transact the business of general insurance may conduct the business of Surety Insurance subject to compliance with eligibility criteria as set out in these guidelines.
Any applicant intending to commence Surety Insurance business can do so by applying for grant of certificate of registration in accordance with IRDA (Registration of Indian Insurance Companies) Regulations, 2000. However, the preference to grant certificate of registration shall be given to the applicant whose promoters are already engaged in carrying out Surety Insurance Business in any jurisdiction.
A General Insurer shall commence Surety Insurance business subject to meeting the requirement of maintaining the solvency margin not below 1.25 times of the control level of solvency specified by the Authority and the underwritten premium in a financial year from the surety insurance business shall not exceed 10 percent of the total gross written premium subject to a maximum of Rs. 500 crores.
The Authority may impose specific conditions for insurance companies for issuance of Surety Insurance contracts, based on assessment of the insurers’ capabilities to handle this business.
These Guidelines set out the minimum underwriting safeguards expected of an insurer in accepting business in respect of surety insurance business for the purposes of ensuring its ability to manage the portfolio or fulfil the reasonable expectations of policy holders. It shall be the sole responsibility of the insurers concerned to have due regard to all relevant factors, including the quality of their business portfolio and risk exposure, in determining whether additional level of underwriting safeguards should be maintained.
