IFSCA Committee submits second interim report on development of international retail business – Finserv from India

[MoF Press Release/22.10.2020]

The International Financial Services Centres Authority (IFSCA) Expert Committee on international retail business development in the IFSC has submitted its second interim report to the Chairperson of the IFSCA.

This interim report covers a number of suggestions aimed at swift and efficient development of international retail businesses in the IFSC, and focuses on recommendations for international insurance activity to flourish in the IFSC. This report follows the first interim report, covering banking-related proposals which was submitted on September 11, 2020. Other key business verticals, i.e., asset management and capital markets, will be covered in reports that the committee will submit in due course.

The Expert Committee has been constituted by the IFSCA to make recommendations on promoting international retail business in International Financial Services Centre (IFSC) along with potential strategies for making IFSC attractive for international financial services; provide a roadmap for future growth of international retail business in IFSC; and also examine and recommend any other issues that are important in the development of the IFSC.

The main recommendations of this interim report deal with making the GIFT IFSC an attractive destination for Life, Health and Non-Life Insurance companies. Some of the key recommendations of the report include:-

Permit Non-resident Indians (NRIs)/ Persons of Indian Origin (PIOs) to buy Life Insurance policies for themselves as well as their family members who are based in India and abroad from companies set up in the IFSC and allow them to pay premium in the currency of their choice (including Indian rupees).

Permit NRIs/PIOs to buy portable life insurance policies which offers them flexibility to pay premium in INR or in foreign currency, based on their choice, after they return to India.

Permit residents to buy overseas health insurance for themselves and their dependents (in India and overseas) from insurance companies or intermediaries in the IFSC for medical treatment anywhere in the world.

Allow insurance companies to offer health insurance products to NRIs/PIOs including covering their family members who are based in India.

Permit insurance companies in the IFSC to offer personal accident cover, baggage loss, documents loss cover and travel health insurance anywhere in the world for NRIs/ PIOs and to any other non-resident.

IFSC should emerge as Reinsurance Hub for Asia and Africa with more reinsurers encouraged to set up base in IFSC. IFSC can also emerge as Aviation insurance Hub for the world.

Insurers be allowed to set up subsidiaries in IFSC to promote business.

Indian investors be allowed to set up direct and reinsurance companies with lower capital requirements to promote insurance abroad.

Foreign reinsurance brokers be encouraged to set up base in IFSC to create a vibrant insurance market.

“The Committee believes that the IFSC can become an engine of economic growth for India. The global opportunity for Insurance sector is immense. The Indian insurance sector is underperforming compared to that of developed and emerging economies. Insurance penetration and density, which are the key performance indicators of the insurance industry, are especially low in India. GIFT IFSC promises to offer a cost-effective and tax-efficient jurisdiction for insurance companies to set up operations there,” said Pradip Shah, Chairman of the Expert Committee

The Government of India had constituted the IFSCA with Injeti Srinivas as its Chairperson earlier this year to develop and regulate the financial services market in the IFSC in India. The other members of the Expert Committee comprise G. Srinivasan, (Ex-CMD, New India Assurance Ltd.), Siddhartha Sengupta, (ex-DMD, State Bank of India), Shyamal Mukherjee (chairman, PWC), Prakash Subramanian (head- Strategy, Standard Chartered Bank), Dipesh Shah (head-IFSC dept., GIFT IFSC) and Nitin Jaiswal (head-Govt Affairs and Strategic relations, Bloomberg, Asia Pacific). The Committee has so far held 16 video meetings and met with 36 participants in financial services in India and abroad.

Apart from channelizing India's offshore business to the IFSC located at GIFT City and making it the gateway for India centric international financial services, the objective is to make it a global hub for international financial services on the lines of London, Hong Kong, Singapore, and Dubai.