Introduction
The International Financial Services Centre (IFSC) in GIFT-City, Gujarat, is quickly emerging as a global hub for financial and insurance services. As more International Insurance Offices (IIOs) set up operations within this jurisdiction, it becomes important for interested applicants to understand the operational landscape. Once established, these IIOs must address a range of considerations to ensure smooth functioning and compliance, which have been explored below.
Permitted Business
Question 1. What type of business can an IIO carry out from GIFT-City?
The International Financial Services Centre Authority (IFSCA) presently recognises two forms of IIOs; incorporated IIOs and unincorporated IIOs. Broadly, an incorporated IIO is established as a company under the Companies Act 2013 and must follow IFSCA-stipulated norms. An unincorporated IIO operates as a branch or representative office of a Foreign Insurer and must follow home country norms.
An incorporated IIO can engage in life, general, health, or reinsurance business. Conversely, unincorporated IIOs can transact in only those lines of insurance permitted in their home jurisdictions1.
Question 2. What are the relevant considerations for IIOs transacting reinsurance?
Reinsurance placements in India are governed by a tiered "Order of Preference". Indian Reinsurers sit at the top (Category 1), followed by IIOs that reinvest 100% of their retained premium in India (Category 2), and finally other IIOs (Category 3)2.
Reinsurance IIOs must also navigate a 50% cap on retrocession3, which reflects a regulatory emphasis on risk retention within India.
Question 3. What is the validity period of an IIO's registration?
Once granted, an IIO's registration remains in force until voluntarily surrendered or cancelled by the IFSCA4[[5. Whilst the ongoing validity of registration offers IIOs operational certainty by removing the need for periodic renewal, they must nonetheless remain vigilant in meeting ongoing compliance obligations to avoid the risk of regulatory action or cancellation.
Prohibited Regulatory Environments
Question 4. Are there any restrictions on jurisdictions from which a promoter or parent entity of an IIO can come?
Yes. Promoters must hail from Financial Action Task Force (FATF) compliant jurisdictions and adhere to global AML/CFT norms6. They must also be based in a country that has a Double Taxation Avoidance Agreement with India7. Compliance with these conditions is necessary for an IIO to be eligible for registration.
Financial Considerations
Question 5. What are the key financial requirements?
The IFSCA has set various financial thresholds for IIOs or their parent entities to ensure they are financially sound and well-capitalised. This helps to protect policyholders and maintain confidence in the IFSC insurance market. The key requirements include the following:
- Incorporated IIOs need INR 100 crore (c.US$.11.8m) for direct insurance and INR 200 crore (c.US$.23.5m) for reinsurance8.
- Unincorporated IIOs must maintain US$1.5m as assigned capital, with certain flexibilities based on IFSCA discretion9.
- The parent of an unincorporated IIO must maintain a Net Owned Funds (NOF) of INR 1,000 crore (c.US$117.9m)10.
- Incorporated IIOs must uphold a 150% solvency margin, whereas unincorporated IIOs must follow solvency norms mandated by their home regulators11.
Question 6. What are the investment norms?
Incorporated IIOs must invest in line with the IFSCA-prescribed investment norms12. On the other hand, unincorporated IIOs may either adopt these norms or follow their home country equivalents13.
Local Presence
Question 7. Are there any KMP/personnel requirements?
Yes. Incorporated IIOs must appoint a CEO, CFO, and Chief Underwriting Officer14. Unincorporated IIOs must appoint a Principal Officer and designated finance and underwriting heads, in addition to meeting home country governance requirements15.
All such individuals must be resident in India, employed directly by the IIO, and be "fit and proper" persons16.
Question 8. Do IIOs need a physical office in the IFSC?
Yes. A physical footprint is expected, and IIOs must submit details of their proposed office location and infrastructure in their registration filings17.
Outsourcing
Question 9. What are the outsourcing norms for IIOs?
The IFSCA has ringfenced key functions from being outsourced. These include regulatory compliance, underwriting and claims decisions, investments, and enterprise-wide risk management. A Board-approved outsourcing policy is also required to govern other functions18.
Data Security
Question 10. What data security standards apply?
IIOs must implement a robust, Board-approved framework on data privacy and cyber risk19. This includes:
- A cyber risk oversight body20.
- A designated Chief Information Security Officer or equivalent senior personnel21.
- A comprehensive cybersecurity framework covering confidentiality and integrity of IT assets22.
- Mandatory cyber incident reporting to IFSCA23.
Reporting and Record Maintenance
Question 11. What are the reporting requirements?
IIOs are expected to maintain transparency through regular submissions to the IFSCA. These include:
- Annual outsourcing disclosures24.
- Quarterly filings from Principal Officers (for unincorporated IIOs)25.
- Annual details on NOF and capital maintenance, and quarterly solvency statements26.
- Ad hoc submissions on product wordings, pricing, and terms and conditions27.
Question 12. What are the norms on record maintenance?
IIOs must maintain complete records of all policies and claims28. Employment records, including tax and remuneration details, must be stored for at least 7 years29.
Ongoing Fees
Question 13. What is the annual fee payable to the IFSCA?
The annual fee is the higher of USD 11.5k or 0.05% of gross premium written30.
Brief Remarks
Adherence to the various operational requirements is essential for IIOs to continue benefiting from the simplified framework of the IFSC. As the IFSCA framework continues to attract interest from both Indian and foreign participants, it is worthwhile to remember that overall compliance is key to securing stability and growth in the longer term in this region.
Footnotes
1 R10 of the IFSCA (Registration of Insurance Business) Regulations 2021 (IIO Regulations).
2 R5(2)(A) of the Insurance Regulatory and Development Authority (Re-insurance) Regulations 2018 (amended up to 23 August 2023).
3 Chapter 3 of the IFSCA (Operations of IIOs) Guidelines 2021 (IIO Guidelines).
4 R7(2) of the IIO Regulations.
5 R21 of the IIO Regulations.
6 R5(8) of the IIO Regulations.
7 R5(2)(g) and R5(6)(b) of the IIO Regulations.
8 §6(1) of the Insurance Act 1938.
9 R17(2) of the IIO Regulations.
10 §6(3) of the Insurance Act 1938.
11 §64VA(1) of the Insurance Act 1938.
12 R2(1) of the IFSCA (Investment by IIO) Regulations 2022.
13 R2(2) of the IFSCA (Investment by IIO) Regulations 2022.
14 R17(8) of the IIO Regulations.
15 R17(7) of the IIO Regulations.
16 R17(7)(iv) of the IIO Regulations read with Chapter 7 of the IIO Guidelines.
17 See the Common Application Form on the IFSCA website here.
18 Chapter 6(3) of the IIO Guidelines.
19 R4(1) of the MIR Regulations.
20 ¶3 of the IFSCA Guidelines on "Cyber Security and Cyber Resilience for Regulated Entities" of 10 March 2025 (Cyber Guidelines).
21 ¶5 of the Cyber Guidelines.
22 ¶7 of the Cyber Guidelines.
23 ¶19 of the Cyber Guidelines.
24 Chapter 6(3) of the IIO Guidelines.
25 Chapter 8(1)(1) of the IIO Guidelines.
26 Chapter 8(1)(2) – (3) of the IIO Guidelines.
27 R9 of the IFSCA (Insurance Products and Pricing) Regulations 2022.
28 R4(1) of the IFSCA (Maintenance of Insurance Records and Submission of Requisite Information for Investigation and Inspection) Regulations 2022 (MIR Regulations).
29 R10 of the MIR Regulations.
30 Schedule I, ¶4(A) of the IFSCA Circular on "Fee structure for the entities undertaking or intending to undertake permissible activities in IFSC or seeking guidance under the Informal Guidance Scheme" of 8 April 2025.
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.
