Insurers in ops for 3 years can set up foreign branches

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

In a set of guidelines, Irda said life insurance, non-life insurance and reinsurance companies should have a net worth of Rs 500 crore, Rs 250 crore and Rs 750 crore, respectively, to be eligible to open branches abroad.

The new guidelines have provided a platform to insurers to expand operations abroad, says Amitabh Chaudhry, managing director and chief executive officer (CEO) of HDFC Life. "While insurers would also need approvals in those jurisdictions where they desired to open offices, it is an enabling provision."

Chaudhry, however, adds companies would not take any immediate decision to open foreign offices. HDFC Life, which has a liaison office in Dubai, is in the process of exploring other markets to expand, he says.

Sector experts say developing nations in Asia and Latin America would be the areas insurance companies would look at for expansion. According to Roopam Asthana, CEO and whole-time director of Liberty Videocon General Insurance, 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."

According to Irda rules, a registered Indian insurer (wanting to go abroad) should not have faced any adverse report of the regulator on regulatory compliances in three years out of the last five years. It also said 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 at least three years out of the last five years to be eligible for the process. A foreign insurance company, according to 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 firm wherein the Indian insurer has a holding of more than 50 per cent 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 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 its foreign operations. Similarly, General Insurance Corp of India is in an advanced stage of having a physical presence in South Africa.