GIFT City a reinsurance hub in the making: IFSCA allows more players
The country is set to become a reinsurance hub with the International Financial Services Centre Authority (IFSCA), India’s first single regulator for the Gujarat-based International Financial Services Centre (IFSC), announcing a new liberal regulatory regime for facilitating the formation of various international and Indian insurance businesses in the Gujarat International Finance Tec-City (GIFT City).
The regulations for setting up IFSC Insurance Offices (IIOs) and IFSC Insurance Intermediaries Offices (IIIOs) were notified by the IFSCA on October 22. The new facilities will help India to develop a global reinsurance hub in the country, competing with offshore financial centres like Singapore, Dubai and Hong Kong, which currently dominate the insurance business in Asia.
“Even non-insurance entities can incorporate public companies in IFSC and undertake insurance or reinsurance business. Similarly, Indian insurance companies can set up subsidiaries to undertake insurance or reinsurance business as IIO,” said an insurance official. Foreign intermediaries will also be allowed to set up IIOs alongside Irdai registered intermediaries like insurance brokers and corporate agents.
Although IFSC offers zero tax provision for 10 years, no foreign reinsurer has set up operations in the centre till now. Global reinsurers can procure business from the region around India by setting up an operation in the GIFT City, said an insurance analyst.
Under the new regulations, foreign insurers and reinsurers can set up branch offices as IIOs to undertake insurance or reinsurance business from IFSC either by setting up branches or subsidiaries. Even Indian insurance and reinsurance companies including foreign reinsurance branches (FRBs) registered with Irdai can also set up branch offices to undertake insurance or reinsurance business from IFSC.
In the case of a branch, a player doesn’t have to bring in any capital and with regard to subsidiaries, new insurance or reinsurance companies will require a paid-up capital (as per Insurance Act, 1938) of Rs 100 crore for insurance and Rs 200 crore for reinsurance.
The new rules specify that no onshore assigned capital will be required for foreign insurers or foreign reinsurers setting up IIOs as branches. The assigned capital of $1.5 million can be maintained in home jurisdictions. Further, there’s no onshore solvency requirement for IIO in the IFSC. Also, the assigned capital solvency margin will have to be maintained in the home jurisdiction.
“The new regulations have the potential of unlocking opportunities for global insurers and reinsurers. The regulatory framework is very friendly and addresses the aspirations and expectations of the players,” said Satyendra Shrivastava, senior partner, Consortia Legal. The new regulations also, for the first time, allow managing general agents under a binding agreement while a delegated authority from foreign insurers or foreign reinsurers will also be able to set up an IIO.