Insurance Registration IFSC |

Regulatory requirements for Insurance Intermediary Office in IFSC

Introduction

The International Financial Services Centres Authority (IFSCA) has introduced the "International Financial Services Centres Authority (Registration of Insurance Business) Regulations, 2021" with the objective of providing a clear and streamlined process for registering and operating insurers and reinsurers in the International Financial Services Centres (IFSCs) under the regulatory purview of the International Financial Services Centres Authority Act, 2019.

Objective

The primary objective of these regulations is to establish a transparent and efficient framework for the registration and functioning of insurers and reinsurers within IFSCs.

Setting Up an IFSC Insurance Office

Registration

To commence the business of insurance or re-insurance in an IFSC, it is mandatory to obtain registration from the Authority according to the specified regulations. The application for registration, including for Lloyd's, must be made in the prescribed forms specified in the First Schedule of these Regulations and in the manner specified by the Authority. It is important to note that separate provisions related to Lloyd's, Lloyd's IFSC, and registration of the Service Company of Lloyd's IFSC are specified in the Second Schedule of these Regulations. The provisions related to MGA, relevant foreign insurer or foreign re-insurer, and their registration are detailed in the Third Schedule of these Regulations.

Eligibility Conditions for Registration IFSC Insurance

Indian Insurer or Re-insurer

An Indian insurer or re-insurer seeking to establish a place of business in an unincorporated form in an IFSC must meet the following requirements:

The applicant is duly registered with IRDAI for undertaking the business of insurance or re-insurance in India.
The applicant has been granted a No Objection Certificate (NOC) by the IRDAI to set up a place of business in an IFSC.
The board of the applicant shall submit the reporting structure of the officials as mentioned in sub-regulation (7) of regulation 17 of these Regulations.
The applicant has a satisfactory track record of regulatory and supervisory compliance.
The board of the applicant undertakes to meet all liabilities arising out of IIO's insurance or re-insurance business.
The board of the applicant undertakes to comply with the assigned capital, solvency, and other requirements specified by the Authority.

Foreign Insurer, Foreign Re-insurer, MGA, or Lloyd's IFSC Insurance

A foreign insurer, foreign re-insurer, MGA, or Lloyd's desiring to establish a branch in an unincorporated form in an IFSC must fulfill the following requirements:

The applicant is registered or licensed for transacting insurance or re-insurance business in its home country or country of incorporation or domicile.
The applicant has been granted a No Objection Certificate by the regulatory or supervisory authority of its home country or country of incorporation or domicile to set up an IIO in an IFSC.
In the case of a desire to transact re-insurance business, the applicant shall comply with the Net Owned Fund requirement specified under sub-section (3) of section 6 of the Insurance Act, 1938.
The board of the applicant undertakes to comply with the assigned capital, solvency, and other requirements specified by the Authority.
The board of the applicant undertakes to meet all liabilities arising out of IIO's insurance or re-insurance business.
The applicant has a satisfactory track record of regulatory or supervisory compliance in its home country or country of incorporation or domicile, as well as in any other
country in which it is functioning. The applicant is registered or certified in a national regulatory environment with whom the Government of India has signed a Double Taxation Avoidance Agreement.
The board of the applicant shall submit the reporting structure of the officials as mentioned in sub-regulation (7) of regulation 17 of these Regulations.
The applicant has a minimum credit rating with good financial security characteristics from any internationally renowned credit rating agency for the last three years.
The applicant shall submit all the required details and information and comply with any additional requirements specified by the Authority. It is important to note that in the case where the applicant is an MGA and the relevant foreign insurer or foreign re-insurer, compliance with applicable requirements is advised.

Branch Office of Foreign Insurer or Lloyd's India IFSC Insurance

A 'Branch Office of foreign insurer' or 'Lloyd's India' registered by the IRDAI and desiring to establish an office in an unincorporated form in an IFSC must fulfill the following requirements:

The applicant of the 'Branch Office of foreign insurer' or 'Lloyd's India' has been granted a No Objection Certificate by the regulatory or supervisory authority of its country of incorporation to set up an IIO in India.
The board of the applicant of the 'Branch Office of foreign insurer' or 'Lloyd's India' undertakes to comply with the assigned capital, solvency, and other requirements specified by the Authority.
The board of the applicant of the 'Branch Office of foreign insurer' or 'Lloyd's India' undertakes to meet all liabilities arising out of business undertaken by the IIO.
The board of the applicant of the 'Branch Office of foreign insurer' or 'Lloyd's India' shall submit to the Authority the reporting structure of the officials as mentioned in sub-regulation (7) of regulation 17 of these Regulations.
The applicant shall submit all the required details and information and comply with additional conditions as specified by the Authority.

Public Company or Wholly Owned Subsidiary IFSC Insurance

A public company or a wholly owned subsidiary of an insurer or a re-insurer desiring to set up an IIO in an IFSC shall be a company limited by shares, formed and registered under the Companies Act, 2013.

Insurance Co-operative Society IFSC Insurance

An insurance co-operative society desiring to set up an IIO in an IFSC shall be a co- operative society registered under the Co-operative Societies Act, 1912 (2 of 1912), or under any other relevant law of any State relating to co-operative societies or under the Multi-State Cooperative Societies Act, 1984 (51 of 1984).

Body Corporate from Outside India IFSC Insurance

A body corporate incorporated under the law of any country outside India, not being of the nature of a private company, desiring to set up its place of business in an IFSC shall fulfill the following requirements:

Establish its place of business in an IFSC under the provisions of the Companies Act, 2013.
Be registered or certified in a national regulatory environment with whom the Government of India has signed a Double Taxation Avoidance Agreement.

Fit and Proper Criteria and Compliance IFSC Insurance

The Authority, before granting registration, may scrutinize the fitness and propriety of the applicant, its promoters, principal officers, directors, partners, designated partners, or any other key managerial personnel (KMPs). Additionally, the applicant entity and its promoters, partners, or controlling shareholders should be from a FATF compliant jurisdiction and comply with international standards set by the Financial Action Task Force (FATF) to combat money laundering and terrorist financing.

Additional Eligibility Conditions and Relaxation IFSC Insurance

The Authority reserves the right to specify additional eligibility conditions and request additional details and information from specific classes of applicants as it deems necessary. The Authority also has the power to relax any of the eligibility conditions defined in these regulations. Such decisions will be supported by written reasons.

Procedure for Registration of an IFSC Insurance Office

Establishing an IFSC Insurance Office requires proper registration with the Authority. This process ensures compliance with regulations and enables the commencement of insurance or reinsurance business in the International Financial Services Centre (IFSC). In this article, we will outline the step-by-step procedure for registration and provide important details for applicants.

Step 1: Submission of Application

Applicants, including Lloyd's, seeking registration as an IFSC Insurance Office (IIO), must submit an application in the specified form provided by the Authority. The application should contain all necessary information and meet the requirements outlined in the First Schedule of the Regulations.

Step 2: Review and Assessment

The Authority will carefully review the application and assess its merits. If the provided information is deemed satisfactory, the Authority may grant a certificate of registration to the applicant, subject to the conditions specified under the Regulations and any additional requirements as necessary.

Step 3: Validity of Registration

Once registered, the certificate of registration, as specified in the Fourth Schedule of the Regulations, will remain valid unless subsequently revoked or cancelled by the Authority.

Addressing Deficiencies and Rectification

If the Authority identifies any deficiencies in the application, they will communicate these to the applicant. The applicant will have thirty days to rectify these deficiencies to the satisfaction of the Authority.

If the applicant fails to rectify the deficiencies within the specified time, the Authority may refuse registration. However, the applicant will be given an opportunity to make written submissions to address the grounds for refusal.

Permissible Activities of an IIO

An IIO registered with the Authority may engage in the following classes of businesses, subject to the specified conditions:

Life Insurance Business
General Insurance Business
Health Insurance Business
Reinsurance Business

If an IIO is registered as a place of business of an Indian Insurer or a Branch Office of a Foreign Insurer or Reinsurer, they may transact the class of business permitted by their home country regulatory or supervisory authority.

Conducting Business and Services IFSC Insurance

An IIO shall conduct its business in any freely convertible foreign currencies other than INR, with persons permitted by the Authority, regardless of their residency.
An IIO shall not engage in any business other than what the registration has been granted for by the Authority.
An IIO registered to transact direct insurance business may be permitted to do so within the IFSC, from other SEZs, and also from outside India.
The IIO registered to transact direct insurance business shall not write direct insurance business from the DTA, except in accordance with Section 2CB of the Insurance Act, 1938.
In the case of reinsurance business, an IIO may accept reinsurance business from cedents in the IFSC, in relation to risk emanating from other SEZs and reinsurance business from outside India. It may also accept reinsurance business from insurers operating in DTA, adhering to the order of preference for cession specified in the IRDAI (Reinsurance) Regulations, 2018.
An IIO may render other insurance or reinsurance-related services as specified by the Authority, subject to obtaining prior approval and fulfilling any specified conditions.

The registration process for an IFSC insurance office involves the submission of an application, thorough review and assessment by the Authority, and the granting of a certificate of registration,

BASIC REGULATORY AND GOVERNANCE REQUIREMENTS IFSC Insurance

In order to ensure compliance and effective governance, an Insurance Intermediary Office (IIO) must adhere to certain regulatory requirements. This section outlines the key requirements that an IIO should follow, as specified by the Authority.

Net Owned Funds (NOF)

An IIO must comply with the Net Owned Funds (NOF) requirement, as outlined in sub- section (3) of section 6 of the Insurance Act, 1938. This requirement applies to foreign companies engaged in re-insurance business through a branch established in an International Financial Services Centre (IFSC).

The Applicant can demonstrate compliance with the NOF requirement using any freely convertible foreign currency.
The NOF must be maintained by the Applicant at all times during the subsistence and validity of their certificate.
Notably, if the Applicant is an MGA (Managing General Agent), the relevant Foreign Insurer or Foreign Re-insurer must also comply with the NOF requirements.
If the Applicant is not a public company, the NOF requirement shall be as specified by the Authority.

Assigned Capital IFSC Insurance

For an Indian Insurer or a Foreign Insurer, Foreign Re-insurer, MGA, or Lloyd's desiring to establish a branch office in an IFSC, they must maintain a minimum assigned capital in any freely convertible foreign currency equivalent to USD 1.5 million.

The assigned capital should be earmarked and held by the Applicant in their home country, country of incorporation, or domicile.
The Applicant must invest the assigned capital in accordance with the requirements of their home country's regulatory or supervisory authority.
The assigned capital, including any additional assigned capital mandated by the Authority, must be maintained by the Applicant at all times during the subsistence and validity of their IIO registration.
Similar to the NOF requirements, if the Applicant is an MGA, the relevant Foreign Insurer or Foreign Re-insurer must also comply with the Assigned Capital requirements.

Paid-up Equity Capital IFSC Insurance

Other entities seeking registration from the Authority, such as a Public Company, Wholly Owned Subsidiary of an insurer or re-insurer, an insurance cooperative society, or a Body Corporate, must comply with the paid-up equity capital requirements specified under sub- section (1) of section 6 of the Insurance Act, 1938.

Solvency Margin Requirement IFSC Insurance

An Applicant registering an IIO as a place of business of an Indian Insurer, branch office of a foreign insurer, foreign re-insurer, MGA, or Lloyd's must maintain a solvency margin for their IIO as stipulated by their home country's regulatory or supervisory authority.

The solvency margin can be maintained in the home country, country of incorporation, or domicile of the Applicant.
The assets backing the solvency margin must be invested in accordance with the requirements of the Applicant's home country's regulatory or supervisory authority.
The assets backing the solvency margin must remain unencumbered at all times during the subsistence and validity of the certificate.
The IIO must provide a quarterly certification, issued by the Appointed Actuary of the Applicant, confirming that the assets, liabilities, and solvency margin on behalf of the IIO are being maintained at the Head Office of the Applicant.
As with the previous requirements, if the Applicant is an MGA, the relevant Foreign Insurer or Foreign Re-insurer must comply with the Solvency Margin requirements.
Additionally, a public company, wholly owned subsidiary of an insurer or re-insurer, insurance cooperative society, or body corporate registering an IIO in an IFSC must maintain a solvency margin specified by the Authority.

Compliance with Act, Rules, Regulations, Circulars, and Guidelines IFSC Insurance

An IIO must comply with the provisions specified in the Act, rules, regulations, circulars, and guidelines issued by the Authority. This ensures adherence to the legal framework and regulatory requirements applicable to the operation of the IIO.

Commencement of Business Operations

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Commencement of Business within 12 Months IFSC Insurance

(1) An Insurance Intermediary Office (IIO) must commence the business for which it has been registered within twelve (12) months from the date of receiving the Certificate of Registration from the Authority.

Extension of Time
If an IIO is unable to commence business within the specified period of twelve (12) months, it must submit an application for an extension of time to the Chairperson of the Authority, at least thirty days in advance of the time limit expiration.
The Chairperson of the Authority will examine the application and communicate the decision in writing.

Limit on Extension
The Chairperson of the Authority shall not grant an extension of time beyond eighteen (18) months from the date of grant of the certificate of registration.

Appointment of Principal Officer IFSC Insurance

An Applicant, desiring to set up a place of business or a branch, including an Applicant of Service Company of Lloyd's IFSC or MGA, must appoint a Principal Officer for the IIO or Service Company of Lloyd's IFSC, as appropriate. The Principal Officer will be responsible for the day-to-day administration of the IIO and its regulatory compliances.

Appointment Requirements

(i) Applicant, other than Lloyd's, for its IIO, must appoint:

Principal Officer
Officer in charge of underwriting of risk with relevant experience
Officer in charge of finance and accounts with relevant experience

(ii) Applicant of Lloyd's IFSC must appoint:

Principal Officer
Officer in charge of finance and accounts with relevant experience. The Officer in charge of finance and accounts of Lloyd's IFSC will also handle finance and accounts related matters of Service Companies of Lloyd's IFSC.

(iii) Applicant of Service Company of Lloyd's IFSC must appoint:

Principal Officer
Officer in charge of underwriting of risk with relevant experience

(iv) The mentioned officers must:

Be directly employed by the IIO or Service Company of Lloyd's IFSC
Be residents of India
Satisfy the 'fit and proper' criteria specified by the Authority.

Appointment of Key Managerial Persons IFSC Insurance

(8) The applicant, other than those mentioned in sub-regulation (7) of Regulation 17, must, with prior permission of the Authority, appoint the following Key Managerial Persons (KMP) responsible for the day-to-day administration and regulatory compliance of the IIO:

Chief Executive Officer
Chief Finance Officer
Chief Underwriting Officer

Additional Appointments

The IIO shall appoint any additional Key Managerial Persons specified by the Authority from time to time.

Requirements for Key Managerial Persons

The mentioned Key Managerial Persons must:

Be directly employed by the IIO
Be residents of India
Satisfy the 'fit and proper' criteria specified by the Authority.

Re-Insurance and Retrocession Compliance IFSC Insurance

The IIOs must comply with the re-insurance and retrocession related requirements specified by the Authority.

Books of Accounts and Records

The IIOs shall maintain their books of accounts, records, and documents in the form and manner specified by the Authority.

Compliance with KYC and AML Guidelines IFSC Insurance

The IIOs must comply with the Know Your Customer (KYC) and Anti-Money Laundering (AML) guidelines issued by the Authority from time to time.

Reporting Requirements

Every IIO shall provide information about its operations to the Authority in the specified manner, at the specified intervals, and in the specified form.
Every financial reporting by an IIO to the Authority shall be in USD unless otherwise specified.

By adhering to these guidelines, insurance intermediaries can effectively commence their business operations in a compliant manner and fulfill their reporting obligations to the Authority.

Operational requirements IFSC Insurance

Payment of Fee and Charges IFSC Insurance

To commence business operations as an Insurance Intermediary Office (IIO), it is essential to pay the specified fee and charges set by the Authority. These fees contribute to the smooth functioning and regulation of the insurance industry.

Maintenance of INR Account IFSC Insurance

Upon approval, an IIO may be permitted to have an INR account using freely convertible foreign currency. This account can be utilized to cover administrative, statutory expenses, and other purposes specified by the Authority. It offers flexibility in managing financial transactions within the regulatory framework.

Change in Shareholding IFSC Insurance

When a public company is granted registration as an IIO, any change in shareholding exceeding five percent of its paid-up equity share capital requires prior approval from the Authority. This includes both transfer of existing shares and the issuance of new shares to new or existing shareholders. However, for changes in shareholding below five percent of the paid-up equity share capital, prior intimation to the Authority is sufficient.

Compliance with Prudential Norms IFSC Insurance

Apart from the aforementioned requirements, an IIO must adhere to the prudential norms specified by the Authority. These norms ensure the implementation of sound financial practices and risk management strategies across the insurance intermediary sector.

Inspection, Investigation, and Information for IFSC Insurance Intermediary Offices

In order to ensure compliance and transparency, the Authority has the power to conduct inspections, investigations, and gather necessary information from Insurance Intermediary Offices (IIOs) and their employees. This revised content aims to enhance clarity, conciseness, and readability while maintaining the original meaning and intent of the information. Let's explore the details of these processes.

Authority's Power

The Authority possesses the authority to inspect and investigate the affairs of IIOs, specifically related to their activities as an insurance intermediary. This includes the ability to request information from the IIO, its employees, and the Applicant. This enables the Authority to effectively regulate and monitor the functioning of IIOs.

Action in Case of Default

If, following an inspection, investigation, or other means, the Authority determines that an IIO is not conducting its operations in accordance with the provisions of the Act, rules, regulations, circulars, and guidelines, or if its activities are not in the best interests of the insurance market or the public, the Authority may initiate appropriate disciplinary action. This may include but is not limited to the suspension or cancellation of the IIO's certificate of registration. The IIO will be given an opportunity to present its submissions before any action is taken. In addition, the Authority reserves the right to take any other necessary action as deemed fit under the relevant laws and regulations.

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