• Recently, the International Financial Services Centre Authority (IFSCA) announced a new liberal regulatory regime for facilitating formation of various international and Indian insurance businesses in the Gujarat International Finance Tec-City (GIFT City).
  • The regulations for setting up International Financial Services Centre (IFSC) Insurance Offices (IIOs) and IFSC Insurance Intermediaries Offices (IIIOs) were notified by the IFSCA earlier, in October 2021.

Important points:

  • Even non-insurance entities can incorporate public companies in IFSC and undertake insurance or reinsurance business.
  • Insurance is a means of protection from financial loss. It is a form of risk management, primarily used to hedge against the risk of a contingent or uncertain loss.
  • Reinsurance is the practice whereby insurers transfer portions of their risk portfolios to other parties by some form of agreement to reduce the likelihood of paying a large obligation resulting from an insurance claim.
  • Similarly, Indian insurance companies can set up subsidiaries to undertake insurance or reinsurance business as IIO.
  • Foreign intermediaries will also be allowed to set up IIOs alongside IRDAI (Insurance Regulatory and Development Authority of India)registered intermediaries like insurance brokers and corporate agents.
  • 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 local\domestic capital will be required for foreign insurers or foreign reinsurers setting up IIOs as branches. The assigned capital of USD 1.5 million can be maintained in home jurisdictions.
  • Further, there’s no local\domestic solvency (ability to pay one’s debts) requirement for IIO in the IFSC.
  • The assigned capital solvency margin will have to be maintained in the home jurisdiction.
  • A solvency capital requirement is the total amount of funds that insurance and reinsurance companies are required to hold.

International Financial Services Centre

  • An IFSC enables bringing back the financial services and transactions that are currently carried out in offshore financial centres by Indian corporate entities and overseas branches/subsidiaries of Financial Institutions (such as banks, insurance companies, etc.) to India.
  • It offers a business and regulatory environment that is comparable to other leading international financial centres in the world like London and Singapore.
  • IFSCs are intended to provide Indian corporates with easier access to global financial markets, and to complement and promote further development of financial markets in India.


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