The International Financial Services Centres Authority (IFSCA) has issued an important clarification for all IFSC Insurance Offices (IIOs) regarding the process of raising invoices for reinsurance transactions. This circular addresses operational challenges previously highlighted by market participants and seeks to streamline cross-border financial flows while ensuring adherence to regulatory requirements.
Why This Clarification Was Needed
Under the IFSCA (Registration of Insurance Business) Regulations, 2021, regulation 18 empowers IFSCA to issue clarifications to ensure smooth functioning of insurance and reinsurance operations in the IFSC.
Recently, several IFSC Insurance Offices shared concerns regarding difficulties in raising invoices in the currency of the underlying reinsurance contract—especially when settling transactions through IFSC Banking Units (IBUs). The concern stemmed from differing currency requirements for invoicing versus settlement, leading to operational and accounting challenges.
The new circular provides a clear and practical solution that respects international reinsurance norms while aligning with banking regulations applicable within IFSCs.
Key Clarification: Currency for Invoicing vs. Currency for Realization
IFSCA has now explicitly clarified the following:
1. Flexibility in Invoicing Currency
IIOs may now raise invoices on:
- Indian insurers
- Foreign insurers
- Reinsurers
- Cedants
in the currency of the underlying reinsurance contract — including INR.
This means if the reinsurance agreement is denominated in USD, EUR, GBP, JPY, or even INR, the invoice can be issued accordingly. This aligns invoicing directly with contract terms and eliminates the inconsistency that many IIOs previously faced.
2. Mandatory Realization in Specified Foreign Currencies
Even though invoicing can be done in any contract currency, the realization of payment into the IIO’s bank account maintained with an IBU must be in “Specified Foreign Currencies.”
The circular also clarifies that Specified Foreign Currency refers to the list of currencies included in the First Schedule of the IFSCA (Banking) Regulations, 2020, as amended periodically. These typically include major globally traded currencies such as USD, EUR, GBP, JPY, AUD, and others.
This dual approach ensures that:
- Business contracts retain their commercial and international structure
- IBUs and IFSC financial flows remain aligned with foreign currency regulations
Regulatory Basis and Authority
The clarification has been issued under Sections 12 and 13 of the IFSCA Act, 2019, read with Regulation 18 of the IFSCA (Registration of Insurance Business) Regulations, 2021.
It underscores IFSCA’s commitment to ensuring a smooth, globally competitive, and compliant environment for insurance and reinsurance businesses operating within GIFT IFSC.
What This Means for the Industry
This circular is expected to:
- Reduce operational bottlenecks for IIOs
- Align invoicing practices with international reinsurance standards
- Facilitate cross-border reinsurance business
- Promote ease of doing business in IFSC
- Improve clarity for accountants, brokers, reinsurers, and IBUs
Ultimately, this is another step toward building a globally integrated insurance hub within GIFT City.