Page 44 - India Insurance Report 2023- BIMTECH

32 India Insurance Report - Series II

London, where the corporate tax rate is 17%. In London, international businesses also benefit from no
withholding tax on dividends, normally no capital gains tax for non-residents, and interest deductions
on loans financing foreign equity investments (subject to certain limits). In Singapore, the taxation rates
are 10% and 17%, respectively, for non-Singaporean and Singaporean policies respectively.

Bermuda continues to stand as the rock of reinsurance, built on a foundation of innovation and
collaboration between business, government and regulators. It continues to evolve to meet the needs of the
global reinsurance market, attracting innovators – such as investors in the Insurance-Linked Securities
(ILS) asset space and increasingly fintech players - to the island and helping to create new business models.

2. The Current (Re) Insurance Regulatory set-up in India

The world ranking of the Insurance Index has currently placed India at 163 position in terms of
rd
Ease of Doing Insurance Business Framework, which reflects adversely on our policy and regulatory
framework. This will require modern regulatory tools to bring about paradigm shifts; for example,
Global Best Practices will have to be adopted, serving as benchmarks, with due localization. Currently,
all ‘Conduct standards’ are issued to the Indian market as ‘Prudential Regulations’, though they are
pursued differently in advanced global markets. India requires simple regulatory architecture where: a)
Regulations/Minimum Standards are not one-size-fits-all for both high performing and poor performing
entities, b) Regulations are outcome based that fuel innovation, and c) Regulations ensure Free
Competition and a Level Playing Field to all. These objectives are possible when principle-based regulations
are allowed to cater to 1) ‘Prudential Regulations’ for Economic Risk-Based Capital & Solvency norms,
Enterprise Risk Management, Corporate Governance and Protection of Policy Holders’ Interests; 2)
Protection of Policy Holders’ Interests based on ‘Contract Certainty’ (pre-sale) and ‘Effective dispute
resolution mechanisms’ (post sales servicing), with Fraud Management standing guard at both ends; 3)
‘Conduct Standards’ that focus on risks rather than compliance.

It is equally important to acknowledge the different types of reinsurance structures and entities that
should be accommodated to cater to the different requirements of the Indian market. It is important for
the Regulatory framework to allow for Insurance Linked Securities, Catastrophe Bonds, and Run-off
companies. The Insurance Act requires significant amendment to allow the establishment of such structures
and also any other innovative structures that may evolve in the future.

Though the ‘Hub’ gets mentioned, it has not been defined anywhere in the Indian insurance regulatory
lexicon. The assumption, perhaps, was that the introduction of the Foreign Reinsurance Branches (FRBs)
would itself create a ‘Hub’. What it means, however, is creating the right ‘conditions’ for attracting
international risks and underwriting such global policies/risks, also allowing a play for competing with
the existing/emerging ‘Global Hubs’ on equal or better footing, from a policy perspective. Not only
was this not done, but the Indian regulations ‘mandate’ at several places that the FRBs will create a ‘hub”!
‘Developing’ India as a Reinsurance Hub requires facilitative ownership, which can only come from the
Indian Regulatory and Development Authority of India (IRDAI) coordinating with the government of
India, IFSC-GIFT City, the Self-Regulatory Organizations and the Indian market at large.