Going abroad becomes less strenous for insurers

Irda will enable companies in operation for minimum 3 years to set up international branches

Setting up foreign branches is set to become lesser strenuous for Indian insures with the Insurance Regulatory and Development Authority (Irda) enabling companies in operation for minimum three years to set up international branches. Insurance companies said that this will offer them a platform to set up offices abroad. Till now, Irda took a decision on setting up of foreign branches on a case-to-case basis.

In a set of guidelines issued to companies, Irda has said that these companies should have a net worth of Rs 500 crore, Rs 250 crore and Rs 750 crore with respect to life insurance, non-life insurance and reinsurance companies respectively. Prior to this, Indian insurance companies did have any set guidelines that they had to refer to, in order to open international offices.

Insurance companies, both life and general, are of the view that that these guidelines have provided an opportunity to take decisions to open these branches and would have more clarity on the eligibility requirements. Amitabh Chaudhry, MD & CEO of HDFC Life said that the new guidelines have provided a platform to insurers. "While insurers would also need approvals in those jurisdictions where they desired to open offices, it is an enabling provision," he said.

Chaudhry, however, added that companies including them, would not take any immediate decisions to open foreign offices. Chaudhry explained that while they had a liaison office in Dubai, they were in the process of exploring other markets to expand.

Insurance industry experts are of the view that developing nations in Asia and Latin America would be areas where insurance companies would look at expanding to. Roopam Asthana CEO and Whole Time Director of Liberty Videocon General Insurance explained that it is an interesting option for companies. "Countries like Sri Lanka, Bangladesh, Bhutan and Nepal have a synergy of operations in insurance, with that of India. This would present a good opportunity, when coupled with local regulations governing insurance in those nations," said Asthana.

The Irda rules have said that the registered Indian insurance company (wanting to go abroad) 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. It also said that there should be a board resolution in support of such a commitment by an Indian insurance company.

The applicants would need to have booked profits for the 3 years out of the last 5 years to be eligible for the process. 'Foreign insurance company', as per Irda, shall mean a company registered outside India whose paid-up capital is subscribed to by an Indian insurance company. It 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.

Insurers also said that the process of approval would be quicker with the new guidelines. "Companies, in the life and non-life space had to wait for a long duration to get the final nod from Irda to set up a foreign office. With these guidelines in place, they have the eligibility rules to fall back on and hence only those eligible will apply," said a senior official of a private life insurance company.

Companies, especially those in the public general insurance space, have a large proportion of premiums coming from international operations. Further, these insurers have expressed interest to set up new offices abroad. New India Assurance is planning to enter markets like Qatar, Myanmar and Canada to broaden the foreign operations. Similarly, General Insurance Corporation of India (GIC Re) is in an advanced stage of having a physical presence in South Africa.