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IFSCA Reinsurance Regulations

Conduct in clients relationship

General Overview – IFSCA
Objective of IFSCA (Re-insurance) Regulations 2023
International Financial Services Centre Insurance Office (IIO)
Retention policy of IIOs
Re-insurance strategy and re-insurance programme (RSRP)
Regulations for Obtaining Quotes for Reinsurance Contract
Placement of Reinsurance Contract
Handling of Reinsurance Premium Fund to be handled by IFSCA Insurance Intermediary Office (IIIO).
Reporting Requirements
What are the “Insurance Segments” as defined under the IFSCA (Reinsurance) Regulations 2023
Insurance Pools
Power to remove difficulties and relax strict enforcement of the regulations:

General Overview – IFSCA

International Financial Services Centres Authority (Re-insurance) Regulations, 2023

International Financial Services Centres Authority (re-insurance) Regulations,2023, were notified w.e.f. 11th April 2023. These regulations shall be applicable to all International Financial Services Centres Insurance Offices (IIOs) unless otherwise specified and the IRDAI (Re-insurance) Regulations and Circulars and guidelines issued thereunder shall cease to apply on these IIOs.

Establishment of IFSCA

Every insurance broker shall:

The International Financial Services Centres Authority (IFSCA) has been established on April 27, 2020 under the International Financial Services Centres Authority Act, 2019. It is headquartered at GIFT City, Gandhinagar in Gujarat.

Role of IFSCA

The IFSCA is a unified authority for the development and regulation of financial products, financial services and financial institutions in the International Financial Services Centre (IFSC) in India. At present, the GIFT IFSC is the maiden international financial services centre in India. Prior to the establishment of IFSCA, the domestic financial regulators, namely, RBI, SEBI, PFRDA and IRDAI regulated the business in IFSC.

IIO – Insurers and Reinsurers

International Financial Services Centre Insurance Office (IIO)

IIIO – Insurance Brokers

International Financial Services Centre Insurance Intermediaries Office (IIIO)

Objective of IFSCA (Re-insurance) Regulations 2023

To provide framework for oversight and control of inward and outward arrangement of re-insurance business by the International Financial Service Centre Insurance Offices (IIOs).

Applicability of these regulations

On and from the commencement of these regulations, the Insurance Regulatory and Development Authority (Re-insurance) Regulations, 2018 and, circulars or guidelines issued thereunder shall cease to apply in International Financial Services Centres.
Notwithstanding anything contained in sub-regulation (1), anything done or any action taken or purported to have been done or taken under the regulation, circulars or guidelines mentioned in sub regulation (1), before the commencement of these regulations, shall be deemed to have been done or taken under the corresponding provisions of these regulations.
An IIO operating in an International Financial Services Centre prior to the commencement of these regulations, shall comply with the additional requirements specified in these regulations, if any, within a period of three months from the of commencement of these regulations or within such extended period as may be specified by the Authority.

International Financial Services Centre Insurance Office (IIO)

An IIO registered with the Authority may carry any of the following class of businesses as may be permitted by the Authority subject to such conditions as may be specified:-

Life Insurance Business;
General Insurance Business;
Health Insurance Business; or
Re-insurance Business.

Provided that the IIO registered as place of business of Indian Insurer or Branch Office of Foreign Insurer or Re-insurer shall be permitted to transact such class of business which is permitted to the Applicant by its home country regulatory or supervisory authority.

Retention policy of IIOs

Every IIO shall formulate a segment-wise retention policy duly approved by its Board and shall maximise the retention commensurate with its financial strength and quality of risk while ensuring that the re-insurance arrangements are not fronting.
The Authority may require an IIO to justify its retention policy and may give such directions, as considered necessary.
Every IIOs shall comply with minimum retention requirements as may be specified by the Authority

Re-insurance strategy and re-insurance programme (RSRP)

Re-insurance strategy and re-insurance programme –

Every IIO shall develop and document its Re-insurance Strategy and Re-insurance Programme (RSRP), which shall form an integral part of the IIO’s overall underwriting strategy and risk management philosophy.
The policies and procedures for selecting and monitoring re-insurance arrangements as well as management responsibilities and controls including re-insurance management systems shall be included in the RSRP.
An IIO, ceding or retroceding the risk shall inter-alia clearly document the risk concentration levels and cession or retrocession limits as per its risk appetite.
The senior management of the IIO or Parent Entity of the IIO, as the case may be, shall –
- develop, implement, and maintain RSRP which shall be relevant to the operations of the IIO and shall ensure that the IIO has sufficient resources to meet their business obligations.
- formulate operational policies and procedures for implementing the RSRP;
- develop clear methodologies for evaluating re-insurance arrangements of the IIOs, including but not limited to –
- identification of tolerance to risk.
- identification of the segment-wise risk retention levels vis-à-vis tolerance to risk with appropriate re-insurance arrangements.
- selection of the panel of re-insurers used, including consideration of diversification and credit worthiness of the re-insurers.
- management of all possible concentration of risks with respect to a particular industry, geographical region, product type, and/or single insured in the insurer’s underwriting books;
- involvement of re-insurance brokers if any, including their role in structuring the reinsurance arrangements;
- the process for monitoring, reviewing and updating the RSRP;
- management of credit and liquidity risk;
- management of legal risk arising from the re-insurance contract;
- develop robust internal control systems to ensure that all business activities are carried out in compliance with the RSRP;
- develop effective reporting systems to satisfy the requirements specified by the Board;
  Explanation - The expression "senior management" means personnel of the IIO or Parent Entity of IIO, as the case may be, who are members of its core management team excluding Board of Directors, comprising all members of management one level below the executive directors, including the functional heads.
The Board of the IIO shall approve accounting year wise RSRP within the timelines as may be specified by the Authority; Provided that in case of an IIO in an unincorporated form, its Parent Entity shall provide details of RSRP designed for the IIO.
The approved RSRP shall be submitted to the Authority, as and when directed by it.

Regulations for Obtaining Quotes for Reinsurance Contract

There are No specific guidelines/ regulations by the IFSCA to be followed while obtaining ‘quotes’ for reinsurance contract except the RSRP finalised by the senior management of the IIO or Parent Entity of the IIO.

Placement of Reinsurance Contract

The Regulation does not advise any order of preference while placing the reinsurance but expects the IIOs to be cautious while selecting the reinsurers. The provision reads as under:

(1) Every IIO, before placing of re-insurance business (cession or retrocession) with the foreign insurers or foreign re-insurers, shall ensure that -

(i) such foreign insurer or foreign re-insurer and its promoters, partners or controlling shareholders are not from the jurisdiction identified in the public statement of Financial Action Task Force as:

a jurisdiction having a strategic Anti-Money Laundering or Combating the Financing of Terrorism deficiencies to which counter measures apply; or
a jurisdiction that has not made sufficient progress in addressing the deficiencies or has not committed to an action plan developed with the Financial Action Task Force to address the deficiencies.
such foreign insurer or foreign re-insurer is duly authorised by its home country regulatory or supervisory authority to transact re-insurance business and engaged in transacting re-insurance business during the immediate past three continuous years; and
the home country of such foreign insurer or foreign re-insurer has signed Double Taxation Avoidance Agreement (DTAA) with India.

Handling of Reinsurance Premium Fund to be handled by IFSCA Insurance Intermediary Office (IIIO).

The insurance money collected by the IFSCA Insurance Intermediary Office (IIIO) shall be dealt with in the following manner:

(i) IIIO shall act as the trustee of the insurance money that it is required to handle, and a payment made to the insurance broker shall be considered as payment made to the insurer or reinsurer.

(ii) IIIO shall ensure that ‘insurance money’ is held in an ‘Insurance Bank Account’ maintained with one or more of the banking units set up in the IFSC.

(iii) IIIO shall give written notice to, and receive written confirmation from, a bank, or other institution that the IIIO / or its Applicant is not entitled to combine the account with any other account, or to exercise any right of set-off, charge or lien against money in that account.

(iv) IIIO shall ensure that all monies received from or on behalf of an insurer is paid into the ‘Insurance Bank Account’ and shall remain in same account as deposit until it is transferred on to the reinsurer or to the direct insurer.

(v) IIIO shall ensure that any refund of premium which may become due to a direct insurer on account of the cancellation of a policy or alteration in its terms and conditions or otherwise shall be collected from the reinsurer and remitted to the direct insurer.

(vi) With respect to reinsurance business, IIIO shall take steps to promptly remit premiums/claims received to reinsurers/insurers/foreign insurance brokers, but not later than by fifteen days or as specified in the terms of business agreement from the date of receipt of the monies into their Insurance Bank Account. Any delay in remittance shall be informed to the reinsurer/insurer / foreign insurance broker and shall take their written consent for delay in such remittance.

Reporting Requirements

An IIO shall furnish information related to inward and outward re-insurance arrangements, as the case may be, to the Authority, in such manner, interval and in such form, as may be specified by the Authority.

What are the “Insurance Segments” as defined under the IFSCA (Reinsurance) Regulations 2023

For the purpose of these regulations, ’Insurance Segment” means insurance or re-insurance business transacted by an IIO in any one or more of the following segments:

(Fire (Other than Oil & Energy);
Marine Hull
Marine Cargo
Engineering
Aviation;
Motor;
Health (incl. PA & Travel), other than policies issued by insurers transacting Life Ins. business
Crop;
Trade Credit;
Oil & Energy;
Liability;
Miscellaneous;
Life (including health insurance policies issued by Life Insurers);
(xiv)Any other segment (under Miscellaneous segment) which contributes more than ten percent of the Gross Written Premium of the Miscellaneous segment;
Any other segment as may be specified by the Authority from time to time.

Insurance Pools

'insurance pool' means a joint underwriting operation of insurance or re-insurance business, in which the participating IIOs assume a predetermined share in all business written;

Any IIO may initiate proposal for formation of an insurance pool and submit the same with the Authority for obtaining prior approval.
The Authority, after examining various factors including but not limited to its objectives, basis, capacity for participation, limits of liability and terms and conditions, may permit for formation of insurance pool.
The Authority, wherever necessary, may also suo-moto direct IIOs to create and participate in insurance pools.
Constitution of the insurance pools and appointment of administrator of such insurance pool shall be in the manner as directed by the Authority;
The insurance pool administrator shall submit the returns, details of Re-insurance arrangement, statements on the performance of the pool, in the manner and periodicity as stipulated by the Authority from time to time.

Power to remove difficulties and relax strict enforcement of the regulations:

In order to remove any difficulty in the application or interpretations of the provisions of these regulations, the Authority may issue clarifications through guidance notes or circulars.
On an application, received along with the specified non-refundable processing fees, the Authority, may for the reasons to be recorded in writing, relax the strict enforcement of any of the provisions of these regulations.