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Guidelines on Establishment and Closure of Liaison Office in India by an Insurance Co.

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  • Guidelines on Establishment and Closure of Liaison Office in India by an Insurance Co.

IRDAI vide Ref No: IRDAI/F&I/GDL/MISC/219/10/2022 has issued a “Guidelines on Establishment and Closure of Liaison Office (LO) in India by an Insurance Company registered outside” India dated, October 17, 2022.

Background:

IRDAI had laid down framework for approval of opening of Liaison Office (LO) in India by Insurance Companies registered outside India (Overseas Insurer), vide circular ref: 30/IRDA/CIR/Lia Off/Dec-05 dated December 7, 2005 and the Guidelines for closure of Liaison Office established in India by Overseas Insurer, issued vide ref: IRDA/024/Closure-FLO/2007-08 dated July 17, 2007. The stipulations/ directions have been reviewed and the enclosed Guidelines on “Establishment and Closure of Liaison Office in India by an Insurance Company registered outside India” are issued.

The major highlights of the Guidelines are as under:

  • A “Liaison Office” (LO) would mean a place of office to act as a channel of communication between the Principal place of business or Head Office (HO) by whatever name called of an Overseas Insurer and entities in India but which does not undertake any commercial/ trading/ soliciting/ industrial activity, directly or indirectly, and maintains itself out of foreign remittances received from the Overseas Insurer through normal banking channels
  • The Overseas Insurer applying for opening of LO should have a financially sound track record during the immediately preceding three financial years in the home country and net worth of not less than USD 65 million.
  • The Overseas Insurer desirous of opening a Liaison office shall apply to the IRDAI in Form IRDAI-FIC-1, along with the certain documents as mentioned under Clause 3 of Guidelines with non-refundable fee of 6000 USD.
  • The Authority shall, after satisfying itself regarding adherence to the eligibility criteria for establishing LO, grant approval for opening of LO or reject the application. An applicant whose application is rejected by the Authority, may approach the Authority for review of its decision within 30 days from the date of receipt of the communication.
  • Approval granted by the Authority shall be valid for a period of three years. An Overseas Insurer may request the Authority for extension of the approval for another one year.
  • An Overseas Insurer which has been granted approval by the Authority for opening of LO in India shall establish such office within six months from the date of approval of the Authority. In case such office is not established within a period of six months, the approval granted by the Authority shall be deemed to have been withdrawn.
  • Overseas Insurers which have opened/started Liaison Offices in India within a period of three years prior to the date of these guidelines may apply for extension of approval for a further period of one year in terms of these guidelines.
  • Overseas Insurers which have been already granted an extension of approval to continue their Liaison offices and have been operating their LOs for more than 3 years as on the date of these guidelines shall close the LO within a period of six months in terms of these guidelines.
  • Permitted activities to be carried out by the LO in India are as under:
  • Representing the Overseas Insurer in India.
  • Carrying out market research/ feasibility study in the field of insurance.
  • Acting as a communication channel between the Overseas Insurer and entities in India.
  • Clause 5 of the Guidelines prescribes conditions for approval including but not limited to following: Not to carry on any activity other than the activity for which approval has been granted by IRDAI, To meet the entire expenses exclusively out of the inward foreign remittances received from the Overseas Insurer through normal banking channels. Not borrow or lend any money from/ to any person in India nor to accept deposits in India To obtain Permanent Account Number (PAN) from the Income Tax Authorities on setting up their office in India Officials of a LO of Overseas Insurer not to participate in the management of any other entity in India.
  • LO shall maintain Books and Records as per the provisions stated under Clause 6 of Guidelines LO shall maintain only one bank account for its receipts and payments Existing LOs having multiple bank accounts as on the date of these guidelines are required to close the same within 3 months or seek specific approval from IRDAI justifying the reasons to have multiple bank accounts .
  • The LO shall submit to IRDAI an annual Activity Certificate from an independent Chartered Accountant or the Company Secretary certifying the compliance with the requirement outlined under Clause 7 of Guidelines.
  • Certificate shall be submitted along with a statement showing details of the research activities/studies undertaken and the information/reports shared with the HO during the reporting financial year by the LO, duly certified by the Principal Officer of the LO

Source category: IRDAI

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