Lloyd’s to set up India reinsurance branch in 2017
Specialist insurance market Lloyd’s will open its India reinsurance branch in 2017. John Nelson, chairman of Lloyd’s, said they intend to begin small in India and would start off with few syndicates and managing agents.
“We will progress in the market gradually and do not want to flood it. When the branch opens up next year, it will begin small and later build up,” he said. In markets like Singapore, too, Lloyd’s started small and has grown bigger gradually over 15-17 years.
Nelson said the aim was to grow ahead of the gross domestic product (GDP) growth in India. He added they expected more liberalisation in the regulatory regime. The insurance regulator has said that General Insurance Corporation of India (GIC Re) would have the first right of refusal in treaties. However, this will be reviewed after 12 months.
The Insurance Laws (Amendment) Act, 2015, had allowed foreign reinsurers to have branch presence in India. This law also allowed Lloyd’s to set up its branch in India. (We covered this in What PM’s UK trip brought to India? )
“Since the rules will be under review after 12 months, this is a path to liberalisation in the country with respect to reinsurance. Overall, the regulations for Lloyd’s have been positive,” Nelson said. With respect to India as a market, the chairman said the market was extremely competitive from an underwriting point of view.
There are challenges in the market too. In the US, international reinsurers pay around 60 per cent of the claims bill following major catastrophes, stabilising the domestic economy in the wake of disasters. In India the reverse is currently true, with around 65% of reinsured risks staying on-shore in the domestic economy. This concentration of risk leads to a concentration of losses, Nelson said.
Lloyd’s onshore presence in India will contribute to the development of a more diverse reinsurance market, which is fundamental to the stability and future growth of the Indian economy, the chairman said. He added that they can help support the expansion of insurance penetration in India and increased insurance can limit the economic impact of catastrophes and other major events that can hamper the growth of the insurance industry, and the economy as a result.
Source: Business Standard