The government of India is considering creating a reinsurance pool for the Pradhan Mantri Fasal Bima Yojna (PMFBY) to retain premiums from the flagship crop Insurance Scheme at home. According to a senior government official, the govt has placed about 50 billion rupees ($ 700 million) with foreign reinsurers in the last six sessions. This has led the government to rethink the involvement of reinsurance companies in the business. The reinsurance pool being considered by the govt will help the money stay in the country. At present, about 25% of the risk- the premium from the scheme is retained by insurance companies while the rest is placed with reinsurance companies. About 50% of the risk is reinsured by state-owned GIC Re and the rest by International reinsurers. With the claim ratio well below 100%, significant profits are made by foreing reinsurers.
In the proposed pool mechanism, while private firms can retain a part of the premium, a large part will go to the pool, which will pay out claims.