Page 54 - India Insurance Report 2023- BIMTECH

42 India Insurance Report - Series II

Singapore, Hong Kong, Malaysia, etc. If this new RES-linked taxation rate is introduced, then:

- India will take a step towards becoming a Reinsurance hub;

- Offshore reinsurance businesses that are sparingly underwritten by FRB’s India office due to the
current high taxation rate of 40% will be underwritten from India, which will also help in building
the reinsurance talent pool in India and expand the team size to cater to a larger geography;

- If such offshore reinsurance business is underwritten from India, then RES linked Tax on the profits
from such business will be paid in India;
- Net premium retained after retrocession will be invested in Indian Government Bonds / Corporate
bonds in India as per IRDA investment guidelines.

3.4.Mumbai, and The International Financial Services Centre (IFSC) At GIFT City

Mumbai is India’s leading financial centre. The city accounts for about 5% share of India’s GDP, 25%
of industrial output, 70% share of total maritime trade, and contributes over 33% of India’s total income-
tax collections. Mumbai is home to capital markets, most banks, and Insurers. Mumbai is the leading
Centre for the insurance market in India, and it has the largest insurance cluster and ecosystem (majority
of the constituents - insurers, reinsurers, Brokers, the Life and Non-Life/General insurance Councils as
well as all the associate bodies such as Brokers, Surveyors, Actuaries Institute of India have their headquarters
besides, majority of Law Firms and Management Consulting firms are all located at Mumbai, and now the
international class Arbitration Centre). Mumbai, as India’s leading insurance center and having the largest
concentration of financial services firms and insurance suppliers in India, deserves to have a regulatory seat
for the growth of Indian insurance as well as for the sake of the Indian macroeconomy (since it is only
through cross-pollination of interactions between the ‘market’ and the ‘regulator’ which will make the
regulatory governance richer). Mumbai is also well placed to develop itself as the Global Indian Insurance
Centre due to its cluster effect, and once the Insurance Authority and the Indian Government decide to
have the best-in-class and globally-benchmarked insurance regulatory and taxation policies put in place.

Recent developments seem to suggest that India is looking to develop the International Financial
Services Centre (IFSC) at GIFT City as a Reinsurance Hub, seeking to attract reinsurers to underwrite
offshore business with competitive taxation policies and an attractive principle-based regulatory
framework. However, it does not have a market ecosystem, which can only be overcome through
creating symbiotic synergies between Mumbai and IFSC GIFT City.

The International Financial Services Centers Authority (IFSCA), a unified authority for the development
and regulation of financial products, financial services and financial institutions in the International Financial
Services Centre (IFSC) has now been working on the development of a strategic framework for making India’s
first IFSC, Gujarat International Finance-tec City (GIFT City) a reinsurance hub. The new IFSCA regulations
attempt to provide flexibility to reinsurers setting up branches in the IFSC with the option to adhere to standards
applicable in their home country; it appears that some of the legacies of the DTA continue to operate. For
instance, the experience of other jurisdictions shows that either organically or semi-organically, the established
financial centres have developed a specialty in certain segments of the reinsurance market, and there are several