Irda uncomfortable with investment flow into insurance from tax havens

Lack of proper information to blame, say industry players

Insurance Regulatory and Development Authority has said that it is not in favour of fund inflows into the insurance sector from countries having easy tax regulation structures like Mauritius and Cayman Islands. "Irda is not comfortable with investments from tax havens into insurance," said J Hari Narayan, chairman of Irda.

Foreign institutional investors (FIIs) often route their investment to India through tax havens due to the relatively lighter regulatory requirements in those areas. Further, India is also a signatory to the Double Taxation Avoidance Agreement with Mauritius.

Industry experts said that the main reason for the Irda's concern was that there was a lack of information and proper disclosures from FIIs routing funds through tax haven route. "Complete compliance to regulations is required. It has been noticed that certain players do not make full disclosures of their financial situations in other nations and losses suffered due to this to the Indian regulator. Hence, the concern is justified," said an insurance company's chief investment officer.

Another official of a private life insurance company added that the exit of certain foreign players from the Indian insurance industry could have promoted the regulator to take this stand.

Irda sources said that the regulator would take a final call when fresh applications for such investments would be made by insurers. However, sources also added that it is unlikely that such proposals would be reviewed on a case to case basis in the future.

Ashvin Parekh, national leader, global financial services, Ernst and Young explained that though there could be a concern from the industry on shunning of funds from these destinations, the regulator was trying to protect the policyholders' interest through their views on inflows from these nations.