IRDA has asked the govt to continue with the scheme for at least seven years to assess the results before making any change. Under the proposed risk pool format, it is proposed to create a government-owned agency that will have the mandate to fix crop premiums and payouts. The participating insurance companies would be restricted only to administrative functioning against a fixed charge.

The tightening of the reinsurance covers given out to non-life insurers for crop insurance will impact the premium collections of insurers even in the second-half of FY20. Reinsurers have increased rates for offering cover to insurers on one-hand while claims continue to pile-up on the other. Globally, rates for crop insurance have hardened because of the rise in crop losses affected by natural catastrophes.

The government is looking to create a pool for claim settlement under its crop-insurance scheme in order to diversify the risks for insurers and to lower the cost of re-insurance. The measure is also intended to address the erroneous perception that insurers are profiting unduly from the crop-insurance scheme. The pool will be managed by a pool manager/administrator, which will be a government-entity.