The Authority has been approached by Indian insurance companies seeking permission to open Offices outside India. In order to exploit the foreign market, after due consideration. The following guidelines are been issued by the Authority under the powers vested on it under section 114 (zd) of the Insurance Act, 1938.

 

 

1.            A “Foreign insurance company” shall mean a company registered outside India whose paid-up capital is subscribed to by an Indian insurance company and shall include a foreign subsidiary company wherein the Indian insurance company has a holding of more than 50% of its paid-up capital or is in a position to control the composition of its Board of Directors. It shall also include a branch office of the Indian insurance company which means (a) any establishment described as a branch by the company; or (b) any establishment carrying on either the same or substantially the same activity as that carried on by the head of the company. 

i.          The class of insurance business to be transacted at foreign insurance company could be:

 

a.         Life insurance business

b.         General insurance business including health insurance business

c.         Reinsurance business

 

and will be the same for which the Indian insurance company has been granted the certificate of registration by the Authority.

 

ii.         A registered Indian insurance company desiring to open a foreign insurance company  “(including branch office) to carry on life insurance or general insurance or reinsurance business shall make a requisition for registration application in Form IRDA-FJV-WoS-1, annexed at Annexure -1 to these guidelines.

 

iii.        The registered Indian insurance company shall submit to the Authority the regulatory architecture along-with reporting, compliance and all other requirements necessary for the establishment and conduct of insurance business of the jurisdiction where it intends to set up a foreign insurance company (including branch office).

 

iv.        The Indian insurance company shall also furnish to the Authority the expenses involved in establishing such a foreign insurance company (including branch office) and the burden it will cast on it.

 

 

i.          The Authority would consider requests from registered Indian insurance companies to set-up foreign insurance company (including branch office) based on the following norms:

 

a.         The registered Indian insurance company should have been in operations for atleast 3 years. In the case of insurers in the private sector, this will be reckoned from the date of issue of R3.

 

b.         The registered Indian insurance company should have the following financials :-

 

 

 

 

    

c.         Board resolution in support of such a commitment by an Indian insurance company.

 

d.         The registered Indian insurance company should not suffer from any adverse report of the Authority on its track record of regulatory compliances, for 3 years out of the last 5 years from the date of application.

 

e.         Any other requirement that may be specified by the Authority from time to time.

 

i.          The following terms and conditions which shall govern the approval of the foreign insurance company (including branch office) of insurers:

 

a.         Initial and further augmentation of capital and liabilities met out of the Shareholder’s funds beyond solvency margin requirement.

 

b.         Compliance with Know your Customer (KYC) and Anti-Money Laundering (AML) guidelines.

 

c.         Compliance with Foreign Exchange Management Act, 1999 and any other law in force governing the operations of such offices.

 

d.         Compliance with host country solvency requirements.

 

5.         The Indian insurance company shall file the copy of the license/certificate of registration upon receipt of the same from the host country.

 

The Board of the Indian insurance company shall approve the operational details for conducting business in the host country which shall include the following minimum points:- 

 

i.          Delegation of underwriting authority:

 

a.         Indian insurers at the beginning of every year shall review the underwriting limits delegated to the foreign branch office and depending upon the financial net-worth, exposures, business plan, etc have the limits approved by the Board of Directors and filed with the Authority.

 

ii.         Underwriting Issues :

 

a.         Indian insurers are advised to formulate an ~Underwriting Policy~ specially formulated for their foreign branches duly approved by the Board of Directors. Insurers should also formulate country-wise policies, which need to be approved by their Board. The Indian insurers shall ensure that the design and rating of products is on sound and prudent underwriting basis. The contingencies insured under the product should be clear and provide transparent cover which is of value to the insured.

 

b.         Comprehensive ~Underwriting Manual’ to be followed by the foreign branches in respect to different aspects of its underwriting portfolio, should be compiled and enforced for observance at all levels. The Indian insurers should have a mechanism to review the delegated powers of functionaries at the overseas branches as regards adequacy of such powers to meet market opportunities and timely business response needs.

 

 iii.       Investment Management:

 

a.         The Indian insurers should formulate an “Investment Policy” to suit the scale, nature and area of operations of the foreign branch offices apart from business considerations and submit the same before its Board of Directors for its approval. In framing such a policy, the issues relating to compliance with host regulator’s requirements, liquidity, prudential norms, exposure limits, stop loss limits in securities trading, management of all investment & market risks, management of assets liabilities mismatch, investment audits and investment statistics, etc. may be addressed. 

 

iv.        Risk Management:

 

a.         The Indian insurers should be compliant to risk management regulatory to meet the regulatory requirements of the host supervisor.

 

v.         Reinsurance:

 

a.         The Indian insurers shall file with the Board of Directors details of reinsurance arrangements proposed for the foreign branches to take care of the exposures that arise on account of the underwriting of risks taken in those countries. This should cover details of structure of reinsurance programme covering both proportional and non-proportional arrangements, net retentions, obligatory cessions, if any, classes covered by reinsurance arrangements, extent of catastrophe covers, security of reinsurers, placement of reinsurance cessions, reinsurance recoveries, outstanding loss provisions, etc.

 

vi.        Supervision and Control by Parent Indian insurer:

 

a.         The Indian insurer should review and revise all control returns including the system of periodical reviews submitted by the foreign branches to their Head Office, to ensure effective supervision and control and to monitor their continued viability. Synopsis of the findings of the inspection / audit / scrutiny and compliance submitted by the branches should be put up to the Audit Committee of the Board at half-yearly intervals.

 

b.         The insurer should also provide systems and checks to ensure that delegated powers are exercised prudently and judiciously by the authorised officials and has no adverse fallout on the parent office.

 

c.         The Indian insurers should also review the delegated powers of functionaries at the overseas branches as regards adequacy of such powers to meet local policyholder’s expectations.

 

vii.       Actuarial Issues:-

 

a.         The Indian insurer utilize the services of its appointed actuary for valuation of liabilities, investment performance, solvency margin ratio, design and pricing of insurance products, creation of reserves for outstanding claims and any other matter which the Board of Directors deem fit.

 

viii.                  Claims settlement issues:

 

a.         The Indian insurer should have a comprehensive “Claims Manual” which gives the manner in which the claims shall be processed, documentation, delegation of authority, policyholders servicing, grievance redressal, etc.

 

ix.        The Board shall be responsible for monitoring the functioning of the operation of the foreign insurance company (including branch office) at regular levels and report to the Authority any event/development which can impair the functioning of the foreign insurance company (including branch office).

 

 

The Board of the company shall review the reports of the branches on a regular basis through difference minimum reporting statement given below:- 

 

i.          Financial reporting

 

a.         Audited annual report giving full details of activities undertaken including premium underwritten, claims incurred, expenses of management, commission, investment income, profits, technical reserves, outstanding recoveries, etc in the form specified in IRDA’s accounting regulations.

 

b.         Investment of funds, returns on investment, NPAs, etc in the formats specified by the Authority.

 

c.         Report of the appointed actuary on the valuation of assets, liabilities and solvency margin of the foreign branch office.

 

ii.         Business Reporting

 

a.         On quarterly basis the business mobilized through the branch office, expenses incurred, claims performance, ageing of claims, details of complaints received and redressed, service standards, distribution channels utilized, etc in the formats specified by the Authority

 

b.         Reinsurance arrangements to ensure that the business being underwritten is adequately protected by suitable arrangements

 

iii.        Others

 

a.         The insurance company shall immediately report to the Authority any regulatory/ supervisory action taken by the host country regulator with full details and the penalty, any administrative action, if any imposed and the remedial steps taken.

 

b.         The Authority would also consider at a future date submission of any other return on the foreign branch office operations

 

c.         Any adverse report/findings shall be communicated to the Authority as soon as it is observed.

i.          In line with the requirements specified at para 4(1) (a),  the Indian insurance company shall have in place appropriate arrangements to ensure that the policyholder’s liabilities that arise for foreign operations are adequately ring-fenced in order to protect the Indian policyholder.

 

ii.         Wherever the company’s foreign insurance company (including branch office) operation results/ likely results point to a loss, then additional capital requirements for meeting the losses shall be contributed out of the shareholder’s funds as no contributions from the policyholder’s funds of the parent would be available for the purpose.

i.          The Authority shall have the right to call, inspect or investigate any document, record or communication after due process of consultation with the host country supervisor.

 

ii.         Notwithstanding the above, where the Authority is of the opinion that the operations of a foreign insurance company (including branch office) are not in the interests of the parent company, the Authority would reserve the right to direct the insurer to close the foreign branch office after giving adequate opportunity to the Indian insurance company of being heard.

 

iii.        Any foreign insurance company (including branch office) with the approval of the Authority shall be closed only with the prior approval of the Authority and subject to compliance of the host country rules and regulations.

 

(T.S.Vijayan)