India’s only operational International Financial Services Centre (IFSC) – Gujarat International Finance Tec City (GIFT cITY – gets a major boost with Insurance Regulatory Development Authority of India (IRDAI) issuing enabling regulations for undertaking offshore insurance business from IFSC.
Under the regulations, with a a minimum capital of Rs 10 crore,.foreign insurers are permitted to open IFSC Insurance Office (IIO) at GIFT IFSC. As GIFT IFSC has been notified as foreign territory by Govt. of India the foreign direct insurers (Life, Non-Life & General) & foreign re-insurers are permitted to open office to undertake dollar denominated business from:
• Within the IFSC in GIFT SEZ;
• all other Special Economic Zones in India;
• from foreign countries (this covers foreign to foreign, India to Foreign & Foreign to India)
• It would also be allowed to undertake domestic Insurance & reinsurance business in line with the provisions of IRDA regulations.
Commenting on the development, Ajay Pandey, MD & Group CEO, GIFT City said “The vision of the Indian government to make India a hub for International Financial Services can be achieved with business friendly regulations and competitive tax regime. Issuance of business regulations for IFSC would go long way in making GIFT IFSC a hub for Offshore Insurance business. GIFT IFSC already hosts three major insurance players, GIC Re, New India & ECGC, and five insurance broking entities. With the business guidelines in place, we are now hopeful that foreign & domestic insurance companies would participate in making GIFT IFSC a hub for International Insurance business.”
The Indian government has provided competitive tax regime for the IFSC units and thereby units are provided 10 year tax holiday (of which the first 5 years is a complete tax holiday and for next 5 years there’s a tax reduction of 50%), which is applicable for all insurers operating within GIFT IFSC. For export of services, Insurance Companies operating from IFSC are exempted from GST.
GIFT IFSC, being a foreign territory mainly conducts offshore business. Thus, the restriction on shareholding does not apply in IFSC and thereby a foreign direct insurer has option to set up operations directly without any local partner.
The move would also help Indian Insurers to set up their offshore office in GIFT SEZ IFSC to undertake dollar business which otherwise was restricted in India. This would become a big enabler for Indian direct and re-insurance players as it provides them a foreign branch in close proximity which would be operationally cost effective.