7 March 2017Insurance

Lloyd’s syndicates flock to India

The establishment of a Lloyd’s branch in India is being followed by intense activity among syndicates keen to increase their exposure to the country, according to law firm Clyde & Co.

“We are experiencing a flow of enquiries as syndicates wishing to participate in Indian reinsurance business move to set up service companies in India,” said Vineet Aneja, a partner at Clyde & Co's Indian associated firm Clasis Law.

Lloyd’s has received final regulatory approval from the Indian insurance regulator and has confirmed that it will open a reinsurance branch in India in time for major renewals in April.

The Lloyd’s decision reflects the ongoing internationalisation of a market which has been working hard to broaden its appeal to foreign insurers, Aneja observed.

A number of foreign reinsurers have recently received approval to open a branch in India. The list includes Swiss Re, Munich Re, Hannover Re and XL Catlin.

The move follows a change of reinsurance rules in India, placing branches of foreign reinsurers at the top of a preference order setting out how Indian insurers are to cede business.

“Over the past couple of years there has been a raft of changes to the legal framework. If 2015 was about the introduction of new rules, 2016 was about their implementation. Now that the new legislation is bedding in, international players are finally able to start building or strengthening their presence in one of the world’s most promising insurance markets. With a population of more than 1.25 billion, a rapidly emerging middle class and comparatively low insurance market penetration, India is undoubtedly an attractive market for insurers.

“Following the recent change in the law in India, we have seen a number of international insurers move quickly to increase their stakes in local JVs [joint ventures] to the new permitted level of 49 percent, up from the previous limit of 26 percent via the automatic route i.e. without prior approval of the government,” Aneja said.

Joint ventures remain a tried and trusted means to access local knowledge or technical expertise to build or strengthen a position in new markets, Aneja noted.

“We believe that setting up a branch or subsidiary will also continue to be an attractive route to growth, especially where barriers to M&A exist. The new rules in India have seen the large global insurers move quickly to set up new offices and position themselves in a market which offers genuinely huge potential.”

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More on this story

9 May 2017   The Insurance Regulatory and Development Authority of India (IRDAI) has formed a reinsurance expert committee to review the current regulatory framework for the market.
15 May 2017   Gen Re, a Berkshire Hathaway company, is the latest reinsurer to receive approval (R3 license) from the Insurance Regulation and Development Authority of India (IRDAI) to open a branch in Mumbai.
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