Insurers, reinsurers may not get tax incentives in GIFT City

International Financial Service Centre will allow insurers and reinsurers to offer foreign currency policies from India

Gujarat International Finance Tec-City (GIFT), which was to enable India to become a global reinsurance hub, might not offer any tax incentives to the insurers and reinsurers setting up offices in the area. This area, which will be an International Financial Services Centre (IFSC), will allow insurers and reinsurers to offer foreign currency policies from India.

Large companies such as General Insurance Corporation of India already have presence at GIFT City. Some private insurers have also expressed interest to set up offices there.

“We have been told separate tax incentives will not be provided for setting up offices in GIFT City. This could be a dampener for many Indian insurers and foreign reinsurers to set up presence here,” said a senior industry official.

GIFT is conceptualised as a global financial and IT services hub, a first of its kind in India, designed to be on par with globally bench-marked financial centres such as Shinjuku in Tokyo, Lujiazui in Shanghai, La Defense in Paris, London Dockyards, among others. GIFT facilitates multi services special economic zones (SEZs) with IFSC status, domestic finance centre and associated social infrastructure.

The areas of business opportunities include life and non-life insurance business, assurance, captive insurance and reinsurance and related operations.

According to Insurance Regulatory and Development Authority of India (Irdai) guidelines, an applicant can set up an IFSC insurance office in the SEZ to carry on reinsurance business. The regulator has said these insurers or reinsurers can accept reinsurance business of all classes of business within the SEZ and from outside the country. They can also accept reinsurance business from the insurers operating in the area in accordance with Irdai’s regulations on reinsurance.

The incentives applicable to SEZ units would be available for reinsurance companies set up in Gift SEZ as well.

An applicant being an Indian insurer can also establish an IFSC insurance office to transact specified direct insurance business within the SEZ. A committee appointed for this purpose said there is a lack of availability of qualified actuaries, especially those working in general insurance and those with requisite knowledge of reinsurance business.

To overcome this, the committee suggested foreign reinsurers, operating out of IFSC be allowed to use the services of their group / regional actuary or actuarial function head as ‘certifying actuary' until local talent is developed.  

GIFT City managing director and CEO Ajay Pandey said: “GIFT team continues to engage with Ministry of Finance for further detailing of the first set of regulations that were announced on April 10, 2015 at Gandhinagar by Sebi, RBI and Irdai.