18 November 2021

IFSCA should embrace captives, says committee

India’s International Finance Services Centres Authority (IFSCA) should develop a framework for captives to operate, according to a report submitted by a committee. The IFSCA regulates Gujarat International Finance Tech City, the country’s first international financial services centre.

IFSCA established the committee under the chairmanship of Ghyanendra Nath Bajpai, the former chairman of Life Insurance Corporation and Securities and Exchange Board of India, to identify key areas for the development of insurance and reinsurance business. Other members of the board include Atul Sahai, CMD, New India Assurance; Devesh Srivastava, chairman/managing director of General Insurance Corporation of India; Shankar Garigiparthy, CEO & country manager for Lloyd’s India; and Leva Segura Cobos, head of regulatory risk management for Asia and Director at Swiss Re.

Its recommendations, published on Tuesday, include developing the captive in the IFSC.

“The captive insurance model is one of the cost-efficient manner of managing own risk,” the committee reports. “Globally, leading financial centres have favourable regulatory regimes for the captive insurance model.  Hence IFSCA may develop a new framework for enabling operations of captives.”

Other recommendations include developing a platform for the shipping industry similar to the ecosystem IFSCA has developed for aircraft leasing and financing; redesigning the investment framework “to give more avenues for insurers to mobilise their funds to a basket of financial instruments and products offering them more returns and flexibility”; and developing alternate risk transfer solutions such as insurance-linked securities, catastrophe bonds and parametric risk transfers available for the global market.