Lloyd’s syndicates keen to tap Indian opportunity, says local lawyer

Lloyd’s syndicates are not wasting their time as they prepare to enter the Indian insurance market following regulatory approval given to the London-based market to open a reinsurance branch by IRDAI, the insurance supervisor. Lloyd’s announced in January that it had been granted final approval for an R3 reinsurance license under IRDAI’s new regime and that it planned to be up and running in time for the April renewals. Lloyd’s is of course not a company itself but rather a market made up of some 60 separate insurance businesses, known as syndicates. As in Singapore and China, the corporation of Lloyd’s provides the regulatory approval, infrastructure and support services but it is up to the individual syndicates to set up shop on the ground and market themselves to brokers and risk managers. According to Vineet Aneja, a partner at Clasis Law, a commercial law firm based in Mumbai, Delhi and London that is associated with Clyde & Co, individual syndicates are keen to take advantage of the new opportunity. “The establishment of Lloyd’s India will presage a period of intense activity among syndicates keen to increase their exposure to India. We are experiencing a flow of enquiries as syndicates wishing to participate in Indian reinsurance business move to set up service companies in India. Lloyd’s’ news reflects the ongoing internationalisation of a market which has been working hard to broaden its appeal to foreign insurers,” said Mr Aneja. The lawyer pointed out that during the past couple of years there has been a raft of changes to the legal framework, as the supervisor worked out how to provide Indian business with needed access to international insurance and reinsurance capacity, and help promote the development of a healthy local market at the same time. Now is the time for action. “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,” said Mr Aneja. One element of the new rules is that the limit on ownership of a joint venture (JV) for a foreign insurers has risen from 26% to 49%. Mr Aneja said this is an interesting option for insurers keen to enter the market. “Joint ventures also remain a tried-and-tested means to access local knowledge or technical expertise, to build or strengthen a position in new markets. 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 to the new permitted level of 49%, up from the previous limit of 26% via the automatic route – ie without prior approval of the government,” he pointed out. “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,” concluded the lawyer.

Lloyd’s syndicates keen to tap Indian opportunity, says local lawyer

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