An amendment in the Insurance Act 1938, the notification of Finance (No.2) Act, 2019 by the Indian government, has significantly lowered the required volume of Net Owned Funds (NOF) for foreign insurers and reinsurers looking to establish a branch in the Gandhinagar International Financial Services Center (IFSC).
Specifically, the NOF requirement has been reduced to Rs 1,000 crore (roughly USD 141.8 million) from the previous Rs 5,000 crore (roughly USD 709.2 million).
The move is expected to attract foreign insurance and reinsurance companies that operate in global financial centres to open a branch in the IFSC in India. Currently, government-backed reinsurer GIC Re is the only reinsurer with an office at the IFSC Gandhinagar in Gujarat.
The Indian government has made efforts to attract global insurers and reinsurer to the Indian marketplace, with relaxed measures introduced over the last few years resulting in a number of players launching Indian branches.
However, GIC Re has first right of refusal on business in the country, a move which frustrated some global players and which some have said has been a hindrance to the development and expansion of the country’s re/insurance industry.
It’s hoped that the latest amendment will result in an influx of global re/insurers setting up shop at the IFSC, and in turn result in on-shoring of global insurance transactions.
