To become global reinsurance hub, GIFT City must offer global regularity clarity
Of course, GIFT City already provides various benefits to reinsurance companies that want to turn this place into an operational center. It offers no additional capital injection requirements, a 10-year tax holiday and significantly lighter staff and regulatory obligations compared to onshore India, where full-fledged operations require a CEO, CFO, chief compliance officer and strict key executive personnel norms.
“These are great advantages,” said Satyendra Shrivastava partner Consortia Legal. “GIFT IFSC offers a light-touch compliance regime…Moreover, there is capital efficiency as there is no onshore solvency or onshore regulatory capital.”
However, reinsurers need less documentation for compliance and ease of remittance.
According to industry estimates, India currently sends around $5 billion in reinsurance premiums overseas annually; $1.5 billion of this is retroactive. Even if $1 billion of the remaining pool shifts to GIFT City, around 30% of India’s reinsurance activity will remain within the country.
“You can see the success from the number of people who have come so far,” said Shasi Nair, CEO of Berkley Insurance Asia, which launched in India through IIO. “At some point we will define success by the amount of reinsurance performed.” Drawing parallels with DIFC in Dubai, he added: “Fifteen years ago, it was the same thing when we started DIFC. They built the infrastructure – physical and regulatory – and it has now become a $3-4 billion reinsurance market. This is a hope for India too.” But early operational experience brought surprises. Many insurers assumed that the International Financial Services Center (IFSC) would provide seamless cross-border movement and minimal documentation. Instead, they were met with a full complement of anti-money laundering (AML) and counter-terrorism financing (CFT) checks, including detailed paperwork for transfers even as small as $5,000.
“Like any new regulatory regime, there will be initial disruptions in operational matters,” Shrivastava said. “For example, IIO is non-resident from an exchange control perspective but resident from a tax perspective. The fact that IFSCA is an SEZ also adds another layer of complexity.”
