India: IRDA Issues Regulations On Registration And Operations Of Branch Offices Of Foreign Reinsures

Last Updated: 11 November 2015
Article by Vineet Aneja

On 30 October 2015 the Insurance Regulatory and Development Authority of India (IRDA) released the eagerly awaited Insurance Regulatory Development Authority of India (Registration and Operations of Branch Offices of Foreign Reinsurers other than Lloyd's) Regulations, 2015 ("Regulations").

Background and purpose

Pursuant to the Insurance Laws (Amendment) Act, 2015 ("Amendment Act") the definition of "insurer" was amended to include a foreign company engaged in re-insurance business through a branch established in India.

On 7 April 2015, the IRDA released the first draft of "Branch Offices of Foreign Reinsurers (excluding Lloyd's) Regulations" ("First Exposure Draft"). The First Exposure Draft provided for registration of a single class of branch offices. Following comments from the industry, the IRDA released a second exposure draft in May, 2015 which proposed allowing two classes of branch offices to operate in India (having a different priority status for accessing the Indian reinsurance market and separate minimum retention requirements). The aforesaid 'two categories model' has been incorporated in the Regulations.

Applicability of the Regulations

The Regulations, which are effective from 19 October 2015, are applicable to all foreign nonadmitted reinsurers intending on setting up a branch office in India. The Regulations, however, do not cover the regulatory framework governing the setting up and operation of a Lloyd's branch in India, which has also been recognized as an 'insurer' pursuant to the Amendment Act1.

Brief overview of the Regulations

In terms of the eligibility criteria, the Regulations require, inter alia, reinsurers to obtain prior approval or in-principle clearance from their home regulator, minimum net own funds of INR 50 billion, a minimum credit rating which is having at least good financial security characteristics for the last three years from any international credit rating agency, the infusion of a minimum assigned capital of INR 1 billion into the branch and proven experience in the reinsurance market for at least 10 years. The regulations require reinsurers to opt any of the two categories for branch registration, i.e., "Category I" branches whose order of preference is on par with Indian reinsurers and "Category II" branches that have a lower order of preference. Category I branches are required to retain a minimum of 50% of their Indian insurance business. The minimum retention for Category II branches is pegged at 30%.

Significantly, the Regulations have laid down an order of preference to be followed by Indian insurers for placing their faculty and treaty surpluses. In this regard, the Regulations require Indian insurers to:

(a) first offer the Indian Reinsurer (i.e., GIC Re), Category I branches or to other Indian insurers the opportunity to participate in their faculty and treaty surpluses;

(b) approach Category II branches after having offered to at least three entities in (a) above;

(c) approach the offices of insurers set-up in Special Economic Zones, only after having offered to at least three entities in each of (a) and (b) above.

(d) offer the balance to overseas nonadmitted reinsurers, only after having offered to at least three entities in each of (a), (b) and (c) above.

Reinsurers interested in setting up a branch will need to go through a two stage application process. In the first stage, the reinsurer will make a requisition for registration application in the prescribed form. This is a fairly detailed requisition form requiring, inter alia, details on the reinsurer's ratings, its shareholders, net owned funds, solvency margin, previous years financial statements, amount of capital assigned for branch office, financial projections of the branch for 5 years, reinsurer's past regulatory record, details on directors and CEO of the reinsurer and CEO, Chief Underwriting Officer and CFO of the branch office. The applicant is also required to submit along with the form copies of its constitutive documents, a statement indicating infusion of capital assigned to the branch, last 5 years annual reports and a certificate from home regulator that reinsurer has necessary permissions to open an Indian branch.

Upon acceptance of the requisition by the IRDA, the applicant is required to apply to the chairperson of the IRDA for grant of registration in the prescribed form along with, inter alia, evidence of minimum INR 1 billion (USD 15.39 million) assigned capital, certificate from a practicing chartered accountant or a company secretary certifying that all the requirements relating to registration fees, assignment capital and other requirements of the Insurance Act, 1938 have been complied with. Reinsurers will also be required to submit, inter alia, results of any market analysis carried out by them with respect to the branch, extensive details on the proposed investment operations of the branch, approach to underwriting, IT systems to be employed, internal controls, proposed expenses of administration and details on the nature of its reinsurance arrangements.

Conclusion

The Regulations pave the way for new players in the Indian reinsurance space and bring in a rigid hierarchy in reinsurance market access for domestic insurers that will undoubtedly have significant long term implications for the industry.

This update is authored by Clasis Law, Clyde & Co's associated firm in India

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Clyde & Co
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Clyde & Co
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions