The country is set to become a reinsurance hub with the International Financial Services Center Authority (IFSCA), India’s first single regulator for the Gujarat-based International Financial Services Center (IFSC), announcing a new liberal regulatory regime to facilitate the formation of various and Indian insurance companies in the Gujarat International Finance Tec-City (GIFT City).
Regulations for the establishment of IFSC Insurance Offices (IIO) and IFSC Insurance Intermediary Offices (IIIO) were notified by the IFSCA on October 22. The new facilities will help India develop a global reinsurance hub in the country, competing with offshore financial centers like Singapore, Dubai and Hong Kong, which currently dominate insurance business in Asia.
âEven non-insurer entities can incorporate public enterprises into the IFSC and undertake insurance or reinsurance business. Likewise, Indian insurance companies can set up subsidiaries to undertake insurance or reinsurance business as an IIO, âsaid an insurance official. Foreign intermediaries will also be allowed to create OIIs alongside intermediaries registered with Irdai, such as insurance brokers and company agents.
Although the IFSC offers a zero tax provision for 10 years, no foreign reinsurer has set up operations in the center so far. Global reinsurers can get business in the Indian region by setting up an operation in GIFT city, an insurance analyst said.
Under the new regulations, foreign insurers and reinsurers can establish branches as an IIO to undertake insurance or reinsurance business with the IFSC, either by establishing branches or subsidiaries. Even Indian insurance and reinsurance companies, including Foreign Reinsurance Branches (FRBs) registered with the Irdai, can also set up branches to undertake insurance or reinsurance business with the IFSC.
In the case of a branch, a player does not have to contribute capital and with regard to branches, new insurance or reinsurance companies will need paid-up capital (in accordance with the law on insurance , 1938) of Rs 100 crore for insurance and Rs 200 crore for reinsurance.
The new rules specify that no onshore restricted capital will be required for foreign insurers or reinsurers setting up IIOs as branches. The assigned capital of $ 1.5 million can be maintained in the originating jurisdictions. In addition, there is no onshore solvency requirement for IIO in the IFSC. In addition, the allocated capital solvency margin should be maintained in the home jurisdiction.
âThe new regulations have the potential to unlock opportunities for global insurers and reinsurers. The regulatory framework is very user-friendly and meets the aspirations and expectations of stakeholders, âsaid Satyendra Shrivastava, Senior Partner, Consortia Legal. The new regulations also make it possible, for the first time, to manage general agents within the framework of a binding agreement, while a delegated authority of foreign insurers or reinsurers will also be able to set up an IIO.