Page 55 - India Insurance Report 2023- BIMTECH

India Insurance Report - Series II 43

advantages for moving to a risk-based capital regime tailored to align with the evolving risks and local requirements.
Experience of established financial centers attests to principle-based laws and regulations acting as a catalyst to
boost these jurisdictions as financial hubs. There is an Alternative risk transfer framework in place, and India
must consider introducing a regulatory regime for ILS, including catastrophe bonds. A predictable, friendly and
participative regulatory architecture are key attributes of such markets in established financial centers, which is
what Ease of doing insurance business is all about. IFSC has been conferred with several taxation benefits with
the intent to promote financial activities. Under the extant framework, there is a 100% income tax exemption for
ten consecutive years out of the first 15 years, and the IFSC unit has the flexibility to select any 10 years out of the
total block of 15 years. However, this is still limited when compared to some of the other leading IFSCs such as
DIFC, etc. Units are also exempted from GST and subject to a lower minimum alternate tax (9%). Subject to
certain conditions, IFSC are further entitled to exemption from commodity transaction tax, securities transaction
tax, tax on long term capital gains and dividend distribution tax. The taxation benefits may not be the sole reason
for an entity to decide the place of business. Rather, firms look for a fair and rational tax system with sufficient
ease of doing business. IFSCA may also explore the possibility of inviting more international arbitral institutions
to set up their offices in the GIFT. Establishing multiple institutions in the IFSC will not only provide competitive
choices to the businesses but it will also promote the culture of institutional arbitration in India, where mostly ad-
hoc arbitration is popular. Capacity building at IFSC would require a substantial investment of time, resources
and efforts, and for GIFT IFSC to become a global reinsurance hub, it needs to become a global city as well.

3.5.GIC Re

GIC Re is a state-owned enterprise notified as the ‘Indian Reinsurer’, and has a global footprint. It
is critical GIC Re converts itself into a Thought Leader and become a leading Indian multinational. GIC
Re must work on a Vision to break into the Global Top 5 by 2030 which will require an additional set
of preparations e.g., among other things, an independent Board with global talent and an ability to
groom globally benchmarked specialisms.

GIC must use its dominant position in India with a growing international profile and lend its
weight to the IRDAI/Government/IFSCA to enable IFSC, GIFT City to become a Reinsurance Hub.
In the fulfilment of this mandate, GIC Re will not seek any ‘preference’; equally, withdrawal of ‘Obligatory
Cessions’ and ‘Order of Preference’ will actually improve GIC Re commercially and improve the Indian
reinsurance market administration beyond recognition. GIC Re has large attributes to become a leading
Indian multinational provided it works on globally benchmarked specialisms and does not remain sheltered
under protectionist policies at home. It must also set standards for the Indian market across underwriting,
claims and risk management. GIC Re could be the next financial sector crown jewel provided the
Government understands that though GIC Re significantly reinsurers the Indian insurance market, its
sustenance and strength come from its global play. It must be granted professional independence and
support as befits an Indian multinational.

3.6.The Central Government

It is crucial that IRDAI, with the active support of the Central Government and the IFSCA, leads