The International Financial Services Centres Authority (IFSCA) of India has received an insurance committee report recommending the development of the international finance services centre (IFSC) in Gujarat into a global insurance and reinsurance hub.
The committee was formed to identify key areas for the development of insurance and reinsurance business in IFSC to ensure ease of operations, limited compliance burdens, competitive costs, ease and scope of innovation, and international cooperation with other established financial hubs.
The recommendations presented to IFSCA specifically mention the captive insurance model as a cost-efficient form of alternative risk management, adding “there is increasing momentum of owning captives”.
The committee outlines that the advantages of self-risk management with customised coverage will also allow IFSC to offer flexibility in risk retention and risk transfer, as well as recapture of underwriting profits and lower administrative costs.
The committee notes that IFSCA may develop a framework to enable captives to operate in the jurisdiction, adding that leading global financial centres have favourable regulatory regimes to facilitate captive operations.
“The captive model can play a vital role as a development catalyst for the insurance sector in IFSC. It will propel many corporates and reinsurers to enter the sector,” the committee says.
In addition, the committee recognises that IFSCA has enabled a framework for global in-house centres, which can be implemented by reinsurers to provide complimentary insurance services.
Other recommendations include the redesign of investment structures to provide insurers with additional products to mobilise funds with greater flexibility and higher returns.
The committee adds that premium financing may be introduced in IFSC as it is a “significant driver” for niche areas of insurance business, as well as the development of alternative risk transfer solutions for the global market, including insurance-linked securities, catastrophe bonds and parametric risk transfers.
The insurance committee is chaired by G. N. Bajpai, who previously served as chairman of both the Securities and Exchange Board of India (SEBI) and Life Insurance Corporation of India (LIC).
Members of the committee are: R. Kumar, chairman of LIC; Atul Sahai, chief managing director of New India Assurance; T. L. Alamelu, member of the Insurance Regulatory and Development Authority; Manoj Kumar, executive director of IFSCA; Devesh Srivastava, chief managing director of General Insurance Corporation of India; Shankar Garigiparthy, CEO and country manager at Lloyd’s India; Ieva Segura Cobos, head of regulatory risk management, Asia at Swiss Re; and Sakate Khaitan, managing partner of Khaitan Legal Associates.
