IFSCA (Investment by International Financial Service Centre Insurance Office) Regulations

International Financial Services Centres Authority (IFSC or Authority) vide notification dated January 12, 2023, (published on January 16, 2023) on IFSCA (Investment by International Financial Service Centre Insurance Office) Regulations, 2022 (“Regulation”).

Background – To enact a comprehensive regulatory framework on Investment by IFSC Insurance Office (IIO).

The key provisions as mentioned under Regulation are as below:

• The provisions of the Regulation are applicable to IIOs incorporated in an IFSC

However the following entities have been given an option either to follow norms applicable to its parent entity or adopt the Regulation:

• IIO not incorporated in an IFSC IIO established as branch of Foreign insurer or Lloyd’s India (registered by IRDAI)
• IIO established as a place of business of Indian insurer/ Indian Re-insurer shall invest assigned capital in accordance with the regulatory requirements applicable in its Parent entity.
• IIOs incorporated in IFSC or the ones that agree to follow the Regulation are required to ensure the following
• Put in place Board approved Investment Policy which shall inter-alia provide for situations of breaches and action plans to address thereto, provisions for providing Economic Capital, if required.
• IIOs shall value all of its assets and liabilities, and maintain solvency margin in accordance with the regulations notified by the Authority in this regard.
• IIO shall earmark, invest and at all times keep earmarked and invested, assets of value not less than that of its liabilities.
• Not more than 5% of the assets can be invested in a Company or body corporate owned & controlled by promoters.
• While dealing with Banks, IIO shall ensure that the Bank has operations in 5 or more countries, rating is not below 2 from banking regulator of home country and has total assets of US$ 100 billion.
• The assets can be invested in IFSC, in India (Foreign Portfolio Investment), country where its Parent Entity is incorporated and country not listed under high risk jurisdiction by Financial Action Task Force.
• In case of relocation of IIO from another country to IFSC, regulatory framework on investment of Assets of said country in respect of the premium sourced therefrom shall be followed.
• Investments can be made out of funds maintained in Parent Entity Account, shareholders’ funds representing solvency margin and policyholder’s funds in accordance with applicable regulations.
• Investments shall be made only in Assets rated as Investment Grade under Insurance Capital Standards – Rating Categories (ICS-RC) by international rating agencies recognized by the International Association of Insurance Supervisors (IAIS).
• The Regulations also prescribes matrix classifying types of investment asset and maximum exposure which can be undertaken by the IIO.
• IIO shall ensure governance requirements as specified under the Regulations.
• Entire investment process of an IIO shall be overseen by an Investment Management Committee
• The investments for an IIO established in an unincorporated form shall be made by the persons duly authorised by the Parent Entity of the IIO, with adequate protocols for reporting and review.
• The Regulation requires IIO to comply with the requirements as prescribed within 6 months from the date commencement of the Regulations.
• Investments shall be made in freely convertible foreign currencies except where the investments are made in India and the IIO shall ensure that Liquidity risk is minimized.
• Every financial reporting by an IIO shall be in USD, unless otherwise specified by the Authority.

Source category: IFSC Insurance Office

Attachments

• /2023/142_IFSCA_(Investment_by_IIO)_Regulations_2022.pdf