Livemint: June 10, 2016
Mumbai: UK-based reinsurer Lloyd’s will launch its India operations by early next year after the insurance regulator released a circular that enables Lloyd’s to set up shop here.
“We would like to start by beginning of next year,” said John Nelson, chairman of Lloyd’s.
Reinsurance is a business that provides cover to insurance players. While currently only General Insurance Corp. of India (GIC Re) provides domestic reinsurance within the country, Lloyd’s reinsures offshore insurance transactions of Indian companies.
Unlike other reinsurers, Lloyd’s operates through a market model wherein a set of members collectively come together to underwrite and provide reinsurance.
In March, Insurance Regulatory and Development Authority (Irda) allowed Lloyd’s to operate in India through its market model and said that the constituents of Lloyd’s India will include members, also called syndicates, who delegate authority to service companies, located within Lloyd’s India.
“Lloyd’s will set up Lloyd’s India, that will be granted a certificate of registration to establish a market and associated structures for conduct of reinsurance business in India and outside India in the manner set out in the regulations,’’ Irda said.
Nelson said that at present the size of offshore reinsurance that Lloyd’s provides to Indian transactions is around $200 million. “This offshore reinsurance will come onshore to India,” he said.
Lloyd’s will not go aggressive on syndicates and initially have only a couple, Nelson said. Giving an example of China where Lloyd’s started off with two syndicates and increased it to 30, he added that it would be scaled up over time. “There are none at the moment. We don’t want a flood of syndicates. We will have a small number of syndicates in the first year,” he said.
The Indian non-life insurance market is estimated to be around $12.5 billion, Lloyd’s said in a release on Thursday. “The Indian non-life market has been growing at a CAGR (2011-’14) of 22%,” the release said. Around 65% of reinsured risks are onshore while the rest are offshore, it added.
When asked about growth plans of Indian operations, Nelson said that Lloyd’s would like a business growth higher than the gross domestic product (GDP) growth of the country. “In a developing world, we are clearly looking to grow above the GDP rate,” he said.
India has significant vulnerability to natural catastrophes and yet there is significant underinsurance in the region. In 2013, the non-life penetration rate for India was 0.6%, compared with an average of 1.4% in Asia Pacific and a 6.1% global average, according to Lloyd’s.
Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.