Delegated authority represents a game changer for Lloyd’s in Asia

The move by the Monetary Authority of Singapore to allow Lloyd’s service companies in Singapore to delegate authority to third parties represents a game changer for Lloyd’s in Asia and will enable significant growth, Kent Chaplin, Lloyd’s head of Asia-Pacific, told SIRC Today.

The move means service companies in Singapore can issue binding authorities to Lloyd's approved coverholders inside or outside Singapore. This represents one of the major enablers for Lloyd’s in the region this year, he said.

“This concept is a part of Lloyd’s DNA given that almost 30 percent of our business globally is written on a delegated underwriting basis,” he said. “Now that our platform in Singapore is permitted to do this, it will cement its long-term position as an international insurance/reinsurance hub and allow significant growth, particularly as the markets in Asia develop.”

This boost for the market will come on the back of what has already been an impressive growth trajectory for the operation.

Lloyd’s Asia was set up in Singapore in 2000, when the market liberalised. Originally focussing on writing Asia-Pacific marine business, energy became an increasingly significant part of its income after the Gulf of Mexico losses of 2005 and when the Lloyd’s market turned its attention to Asia in search of diversification.

Since then, the market has grown from a standing start in 2000 to, in 2015, having 20 managing agent service companies and 24 syndicates and writing premiums in excess of US$620 million.

“It’s been a phenomenal growth trajectory,” Chaplin said. “We have about 380 people on the Lloyd’s Asia platform. Whilst we started off writing marine we are now writing all the classes of business that you would see in the London market - with an increasing emphasis on property reinsurance, which is almost half of the income.”

He added that the Singapore market has also become a significant property reinsurance market at a macro level in Asia. In the last 12 months Lloyd’s Asia has become the largest insurer of offshore income. “The majority of foreign insurers and reinsurers in Singapore are here to write offshore business - it’s very much a regional hub,” he said.

In terms of Lloyd’s itself, while he stresses that Singapore-domiciled business is important and attractive business, it only represents ten percent of the portfolio. Some 90 percent is offshore regional business. “Lloyd's Asia has grown because it is the perfect platform to base yourself for writing international Asia Pacific business,” Chaplin said.

He said that China represents the biggest source of income followed by Australasia and then Korea, Indonesia, the Indian sub-continent and Thailand. He said that much of the business coming to Singapore used to be placed in London or Bermuda, or elsewhere previously.

And the growth of the platform continues, he said. Two new service companies have set up on the platform this year alone: the Standard Syndicate 1884, managed by Charles Taylor Managing Agent, and Antares Underwriting Asia, which launched this month. This represents the 20th managing agent service company to join the platform.

The pipeline of newcomers also looks healthy. “We continue to have strong interest in the platform. This represents the third influx into Singapore,” he said.

He explains that the first influx was driven by syndicates wanting to write energy in 2006/07, followed in 2010 by those wanting to write property reinsurance. But this latest surge is not driven by a specific line of business, Chaplin said.

“I think that managing agents now understand that to grow a global and diversified book you need to be in Asia, because of the demand, the opportunity and to be closer to the risk."

Chaplin stressed that while the opportunities across the Asian region are vast, companies should never underestimate the differences and nuances between different countries and markets.

“Asia is an incredibly diverse and complex region and is extraordinarily large", he said. “Every country is extraordinarily different from the others – driven by different stages of economic development, culture, regulation and so on.

“There are mature markets, such as Japan, Korea, Australia and New Zealand, and markets with a very low insurance base, such as Vietnam, Laos, Cambodia, and Myanmar.

“Markets such as the Philippines, Thailand, Malaysia and Indonesia, are growing at a rapid pace. It is a complex and exciting region."

Within this, he stressed the importance of the free trade agreement being negotiated by the Association of South-East Asian Nations [ASEAN] which includes financial services.

“We’re not expecting a multi-lateral, open community like the European Economic Community at this stage but we’re certainly starting to see the building blocks. Good progress is being made and in another five years or so we may see some liberalisation of the financial markets on a cross-border basis,” he said.

“This is very important to Lloyd’s. We fully support an open environment within the ASEAN region which allows insurers and reinsurers to trade specialist and complex insurance products which will support economic growth in these markets.”