The Insurance Regulatory Development Authority (Irda) has allowed domestic insurers to open full-fledged branches overseas.
Till now, only Life Insurance Corporation and state-owned non-life insurers were allowed to open legal entities or representative offices overseas.
The step would give insurers opportunity to tap the non-resident Indian (NRI) community effectively as earlier they were allowed to sell insurance products to NRIs only when they visited India.
“A full-fledged branch will give us more flexibility to tap the NRI segment,” said Sunil Sharma, Actuary at Kotak Life.
However, industry experts said that it may also lead to more hassles for Indian insurers as their foreign entities or branches will be regulated by foreign regulators as well.
“Foreign branches for Indian insurance companies are feasible only if the foreign regulator allows the products they sell here. Typically, it may require special approvals or licences,” said GV Nageswara Rao, MD & CEO, IDBI Federal Life.
As per earlier norms, legal entities were regulated only by the regulator of the country which they operated. Now, Irda too would have the jurisdiction.
Experts said companies that have access to foreign markets through their banking partners may not be interested in setting up their branches.
The approval is subject to conditions on net worth, solvency and business performance of Indian insurers.
The aspirant company should have been operational in India for at least three years. In the case of private insurers, it will be reckoned from the date of issue of the third round of its licence.
The minimum net worth of life insurance companies should be Rs 500 crore, non-life insurance companies Rs 250 crore and reinsurance companies Rs 750 crore. The insurers should be profitable for at least three years out of last five years.
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