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IRDA Guidelines for opening of representative/ liaison offices overseas by an Indian insurance company

The Insurance Regulatory and Development Authority (IRDA) has issued a circular in January 2007, specifying the following guidelines for setting up representative/liaison offices abroad:

1. A “Representative/ Liaison Office” would mean a place of business to act as a channel of communication between the Principal place of business or Head Office by whatever name called and entities in India but which does not undertake any commercial/ trading/ industrial activity, directly or indirectly, and maintains itself out of inward remittances received from abroad through normal banking channel.

2. All Indian insurance companies registered with IRDA shall seek prior approval of the Authority for opening offices abroad.

3. Indian insurance companies desirous of opening offices overseas shall apply to the Insurance Regulatory and Development Authority.

4. The opening of representative/ liaison offices would be subject to the following requirements:

a. The representative office would function as an extended arm of Indian insurance company and no underwriting will be done outside India or other than in Indian rupees.

b. Though it may be permissible to identify the overseas prospects who could be non-resident Indian through the offices abroad, the completion of the underwriting contracts should be done only in India.

c. No payment of fees by whatever name called would be permitted outside the country for lead generation, etc notwithstanding any relaxation from the FEMA angle. This entire activity would invariably done by accredited Indian staff of the insurers placed in the liaison office or at HeadQuarters in India.

5. IRDA may consider permitting Indian insurance companies to set-up representative offices overseas so long as a. Insurer has a good financial strength (as exhibited in the accounts) and maintains the prescribed solvency requirement of 1.5.

b. Track record on market conduct, regulatory compliances, redressal of complaints, etc. indicates that there are no serious adverse features on the functioning of the company on the record of IRDA.

6. The insurance companies would be required to furnish information to IRDA on the business mobilized through the representative office and a certificate that the expenditure incurred at the overseas centre together with the Indian operation is well within the limits specified.

7. The Indian insurance company shall be required to comply with the Foreign Exchange Management Act, 1999 and any other law in force.

8. The permission for opening of representative/ liaison office overseas by an Indian insurance company registered with IRDA shall be subject to the terms and conditions as may be stipulated by the Authority from time to time.

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