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The Asian Reinsurance Corporation (Asian Re) was conceived in 1974 by the UNCTAD (United Nations Conference on Trade and Development) with the objectives of generating regional reinsurance capacity, stemming the outflow of foreign exchange from the region by way of reinsurance premium and protecting the region from the volatility in pricing due to losses elsewhere. It was constituted as an intergovernmental organisation in 1979 under the aegis of the UN-ESCAP by nine governments of Asia viz, Afghanistan, Bangladesh, Bhutan, China, India, South Korea, Philippines, Sri Lanka, and Thailand. In 1993, Iran joined as the tenth member.
As per the original agreement, the membership in Asian Re was confined to "developing" member states of ESCAP. The maximum capital contribution of a member-country was restricted to $5,00,000. These restrictions were in line with the objectives and reflected the thinking of the times - an organisation of developing countries where all members will be equal. The ceiling on capital contribution was obviously intended to ensure this parity among member nations irrespective of physical, demographic and economic size - this also was a predominant theme of the time.
These restrictions with underlying laudable principles were found to stymie the growth of Asian Re right from its inception in 1980. Further, other regional reinsurance organisations began sprouting up, to be wound up subsequently, and this distracted the attention of a number of countries in the region. Added to these woes was that the existing member countries were not allowed to put in more capital.
These teething problems should be understood in the context of the high capital requirement of a reinsurer with a vision to emerge as the Lloyd's of Asia. In spite of the unique status Asian Re enjoyed viz,
l the privileges and immunities of an intergovernmental organisation
l tax exemption
l self-regulation
l exemption from routine exchange control, it could not grow and evolve to meet the reinsurance capacity needs of the region mainly due to the inability to raise the capital to a critical mass.
This prompted a move towards amending the constituting Agreement. An amendment in November 2000 removed the restriction of membership to "developing" countries only and lifted the cap on "maximum" capital contribution per country. These amendments enabled Asian Re to pursue enrolment of developed countries of ESCAP and to invite present member governments to increase their capital contribution.
These changes, however, did not bring in the increase in capital which Asian Re acutely needed. The priorities and focus of governments have changed over the years, as they have assumed the role of facilitators rather than active players in business activities like reinsurance.
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