IFSC Insurance Offices Must Follow Retrocession Limits on Global Reinsurance Business: IFSCA

 The International Financial Services Centres Authority clarified the regulatory framework governing International Financial Services Centre Insurance Offices (IIOs) operating through Managing General Agents (MGAs) in GIFT IFSC. The Authority stated that MGAs bear primary responsibility for compliance with IFSCA regulations, though foreign reinsurers remain responsible for solvency, capital, and Net Owned Fund requirements through the MGA structure. It clarified that IIOs established through MGAs are jointly registered with foreign reinsurers and must comply with retention, retrocession, reporting, and investment norms under applicable IFSCA regulations and guidelines. The Authority further held that retrocession restrictions apply to the entire gross reinsurance premium, including international business generated outside India. Investment norms may follow either IFSCA regulations or the home country regulatory regime, depending on the option chosen during registration. The Authority also clarified that surrender or closure of an IIO requires prior regulatory approval under the IIO

INTERNATIONAL FINANCIAL SERVICES CENTRES ATHORITY

Date: 09 December 2025

By Electronic Mail

Dear Sir,

Subject: Request for Informal Guidance by way of Interpretative Letter under the IFSCA (Informal Guidance) Scheme, 2024 by  in relation to regulatory framework for International Financial Services Centre Insurance Offices (“II0”) through Managing General Agent (“MGA”) in International Financial Services Centre (“IFSC”)

1. This has reference to request letter dated applicant) on the captioned subject.

2. The applicant inter-alia, represented as under:

intends to enter in Indian reinsurance industry through an MGA in GIFT City IFSC and seeks to understand certain key issues relating to the regulatory framework for capacity providers of MGAs. Accordingly, informal guidance by way of Interpretative Letter is sought from the International Financial Services Centres Authority (“Authority”) on the same.

3. In view of the above, point wise response on guidance sought by is as follows –

(A) Query 1: Reporting obligations under applicable IFSCA regulations:

Primary obligation with respect to ongoing compliances and reporting will be on the MGA and not the Foreign Reinsurer. Filing with respect to solvency, assigned capital, maintenance of Net Owned Funds (NOF) will have to be done by the Foreign Reinsurer. However, such compliances will be undertaken through the MGA and the Foreign Reinsurer will only be directed to furnish these reports if MGA is unable to submit such reports in a timely/prescribed manner.

Response —

The provisions of clause (5)(e) of 3rd Schedule of IFSCA (Registration of Insurance Business) Regulations, 2021 (hereinafter referred as II0 Regulations) reproduced below may be referred to —

“The MGA shall undertake the following —

(e) compliance of Act, rules, Regulations, guidelines, circulars issued by the Authority from time to time;”

(B) Query 2: Retrocession of reinsurance business or repatriation of premium

(a) As per international practice, MGAs do not retain premiums as they are not the risk carriers. Since MGAs underwrite business on behalf of its capacity providers, premiums are transferred to respective capacity providers/ reinsurers without any retention other than the agreed overriding commission or fee. There would be no limitation on MGAs to transfer the full premium to the risk carrier/capacity provider, as the latter could have existing retrocession arrangements that need to be honoured.

Response –

(i) In terms of Third Schedule read with Reg. 4 of II0 Regulations, a MGA and relevant Foreign (Re)insurer would be issued joint certificate of registration (CoR) as an IF SC Insurance Office (HO),

(ii) Thus, unlike international practice, MGA in IFSC is not registered as

(iii) Hence, an II0 set up as MGA is subject to provisions of Reg. 17(9) of II0 regulations read with Chapter 3 of IFSCA (Operations of II0) Guidelines, 2021 (“II0 Guidelines”) on the matter of re-insurance and retrocession requirements.

(iv) It will be joint responsibility of the MGA and relevant (re)insurer to comply with retention / retrocession requirements and also investment requirements.

(b) In case of premium that is transferred to the home office of II0, is there any specific requirement of the regulator that the Foreign Reinsurer should deal with such premiums in a particular manner. For example, does the Authority require the premium to be invested in a particular way?

Response –

(i) As discussed in para B (a) above, MGA registered as an II0 shall comply with retention / retrocession requirements,

(ii) The II0 at the time of registration shall be required to clearly indicate the choice of investment regulation regime preferred by it, in terms of Reg. 2 (2) read with Reg. 2 (3) of the IFSCA (Investment by II0s) Regulations, 2022.

(iii) Based on the choice indicated, the II0 shall adhere to the investment norms i.e. either regulations as specified by IFSCA or as specified by its home country regulatory or supervisory authority.

(c) Any specific restrictions or conditions on the use of CBR or foreign reinsurer for retrocession?

Response –

Provisions of Reg. 17(9) of II0 regulations read with Chapter 3 of IFSCA (Operations of II0) Guidelines, 2021 (“II0 Guidelines”) on the matter of re­insurance and retrocession requirements reproduced below may be referred to —

Reg. 17(9) of 110 regulations:

“The HOs shall comply with such re-insurance and retrocession related requirements as may be specified by the Authority from time to time.”

Chapter 3 of II0 Guidelines:

“The HO permitted to transact re-insurance business, shall not retrocede more than fifty (50) per cent. of its reinsurance business “

(C) Query 3: Investment requirements

(a) Can the Foreign Reinsurer invest premiums in home country as per home country regulations? When can such investments be withdrawn?

Response —

(i) The applicant MGA / relevant foreign (re)insurer at the time of registration shall be required to clearly indicate the choice of investment regulation regime preferred by it, in terms of Reg. 2 (2) read with Reg. 2 (3) of the IFSCA (Investment by II0s) Regulations, 2022.

(ii) Based on the choice indicated, the II0 shall adhere to the investment norms i.e. either regulations as specified by IFSCA or as specified by its home country regulatory or supervisory authority of the relevant foreign (re)insurer.

(b) In case the investments are required to be domiciled in India, how will it be invested as the Foreign Reinsurer does not have a legal presence in India?

Response –

Reg. 9B of IFSCA (Investments by II0) Regulations, 2022 reproduced below may be referred to —

“The investments by an II0 in DTA as per category specified in sub-regulation (2), clause (A) of Regulation 5 of the Insurance Regulatory and Development Authority of India (Reinsurance) Regulations, 2018 shall be in accordance with the following matrix:

(D) Query 4: International Business –

The proposed regulations on retrocession / investment are applicable to premiums generating out of Indian accounts/business only and not on international business (i.e. business emanating from outside India) written by the MGA.

Response –

The provisions of Reg. 17(9) of II0 regulations read with Chapter 3 of IFSCA (Operations of II0) Guidelines, 2021 (“II0 Guidelines”) on the matter of re-insurance and retrocession requirements are applicable on entire gross re-insurance premium booked by an II0, respective of emanating from mainland India, IF SC(s) / SEZs or from foreign jurisdiction(s).

(E) Query 5: Delegated Authority Arrangements or Binders:

Foreign Reinsurer and the MGA have the liberty to determine the terms of the delegated authority arrangements or binders. So long as the terms of the binding arrangement do not violate the provisions of the IFSCA regulations, the parties are free to determine the extent of authority being delegated to the MGA by the Foreign Reinsurer. There is no mandatory requirement of delegating certain minimum authority to the MGA. In this regard, may we seek guidance of the Authority on the following:

(a) Can the binder or delegated authority agreement provide a mechanism whereby the Foreign Reinsurer plays an active role in underwriting process of the MGA?

Response —

Clause 2 (3) and 2(4) of Third Schedule read with Reg. 4 of II0 Regulations may be referred to, on the matter of binding agreement.

(b) Can the binder or delegated authority agreement provide a mechanism whereby the Foreign Reinsurer plays an active role in claim settlement process of the MGA?

Response —

Clause 2 (3) and 2(4) of Third Schedule read with Reg. 4 of II0 Regulations may be referred to, on the matter of binding agreement.

(F) Query 6: Monitoring of Limits

Under the IFSCA Regulatory Framework, there are some restrictions on investment and retrocession

(a) The restrictions will be calculated based on annual GWP on written basis (not on earned basis) and there will be no monthly or quarterly assessment in this regard.

Response —

(i) The retrocession / retention stipulations will be supervised based on GWP basis.

(ii) 11 and 17 of II0 Regulations read with Chapter 8 of IFSCA (Operations of II0) Guidelines, 2021, specifies reporting formats, periodicity of which is Quarterly.

(b) Are there specific forms, disclosures, or reports that need to be submitted by the MGA or Foreign Reinsurer in this regard?

Response —

Reg. 11 and 17 of II0 Regulations read with Chapter 8 of IFSCA (Operations of II0) Guidelines, 2021, specifies reporting formats, periodicity of which is Quarterly.

(G) Query 7: Tax treatment of Foreign Reinsurer

Foreign Reinsurer will not be a “unit” under the SEZ and IFSCA regulations and therefore the Foreign Reinsurer is not subject to taxation in India, similar to a CBR. If the Foreign Reinsurer does not have a presence in GIFT IF SC, will the income of the Foreign Reinsurer be taxed in India? However, the MGA is eligible for tax benefits given that MGA is incorporated/registered as a unit in GIFT IFSC.

Response —

It is suggested that clarification w.r.t. taxation may be obtained from tax authorities in India.

(H) Query 8: Repatriation of Surplus —

The IFSCA Regulatory Framework does not The II0 Regulations is self-explanatory on the matter. Stipulate any restriction on repatriation of funds by the IIO/MGA to the Foreign Reinsurer. There is no regulatory approval required before repatriation of funds by the IIO/MGA to the Foreign Reinsurer or Capacity Provider

Response —

The II0 Regulations is self-explanatory on the matter.

(I) Query 9: Closure of HO and withdrawal of capacity

In the unanticipated event of a change in external factors or other reasons outside its control, if the Foreign Reinsurer decides to withdraw capacity or close the IIO/MGA, prior regulatory approval is necessary. Apart from seeking confirmation (evidence) that the Foreign Reinsurer has met all its valid and subsisting liabilities (towards cedants and statutory/regulatory authorities), will there be anything specific that the Authority may require from a foreign Reinsurer as a Capacity Provider. Further, the MGA will have to be wound up as per company law provisions after the Authority allows the closure of MGA. Response —

Reg. 21 of II0 Regulations reproduced below may be referred to —

“Surrender of Certificate of Registration: An Applicant may be allowed to close its HO and surrender its Certificate of registration only with the prior approval of the Authority and subject to such conditions as may be specified by the Authority.”

4. It is to be noted that provisions of the extant regulatory framework, as cited above, are self-explanatory.

5. This above position is based on the information furnished in your letter under reference. Different facts or conditions might lead to a different interpretation. This letter does not express the decision of the IFSCA (herein after referred as ‘Authority’) on the question referred through your letter.

6. The applicant is advised to note that the above views are expressed only with respect to the clarification sought in the letter under reference on the various regulatory framework on (re)insurance of the IFSCA and do not affect the applicability of any law and any other regulations, guidelines and circulars framed or administered by the Authority or laws administered by any other authority.

7. Kindly acknowledge receipt.

Thanking You,
Yours Faithfully,
Bhaskar Khadakbhavi)
General Manager
Business Phone +916180 9865
Email id — bhaskar.khadakbhavi@ifsca.gov.in