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CS Professional · IFSCA - Regulations, Listing and Compliances · Insurance and Reinsurance

An IFSC insurance office (IIO) of a foreign insurer has a head office that is financially sound. Its Principal Officer argues that, because the head office is well capitalised, the IIO need not maintain separate assets or solvency in the IFSC. Which response is correct?

The argument fails. An IFSC insurance office must itself meet the capital, asset and solvency requirements prescribed by IFSCA for its IFSC business, regardless of the head office's strength. Parent support or a comfort letter cannot substitute for these requirements, whether the business is direct insurance or reinsurance.

  1. ACorrect, as the head office capital is always counted for the IIO
  2. BCorrect, provided the head office files a yearly letter of comfort
  3. CCorrect only for reinsurance business
  4. DIncorrect, since the IIO must itself satisfy the capital, assets and solvency requirements applicable to its IFSC business, as prescribed by the IFSCACorrect

Explanation

The regulator requires the IFSC entity or office to meet prescribed capital, asset and solvency standards for its IFSC business. A strong parent does not replace this. A comfort letter or limiting the argument to reinsurance has no basis in the framework.

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