Lloyd’s applies for license and appoints country head in India as part of big expansion plan

Lloyd’s, which has reinsured Indian risks for more than a century, moved quickly following the decision by the Indian Development and Regulatory Authority (IRDAI) to publish regula-tions last month that govern how the Lloyd’s mar-ket can operate in India. The rules came as part of a package that is designed to open the market to international insurers but still protects the interests of the local insurance industry by insisting on minimum local retentions. Mr Garigiparthy told Commercial Risk Asia that he is excited about the prospects for Lloyd’s in the huge Indian market under the new regime, despite the restrictions. He also said he hopes that, over time, Indian insurance and reinsurance buyers will be able to more freely choose where they place their risks as the market continues to mature and grow.hideAs the London-based market ann-ounced its application for a license, John Nelson, chairman of Lloyd’s, said: “We believe a Lloyd’s presence will contribute to the development of a more diverse reinsurance market, which is fundamental to the stability and future growth of the Indian economy. Lloyd’s will also help to position India as a centre for insurance, reinsurance and associated services. “While there are elements in the published regulations that may impact the ability of our market to perform to its full potential in India, we are nonetheless pleased that the regulatory framework has now been published, enabling us to submit an application for a reinsurance branch. Mr Nelson said Lloyd’s looks forward to continuing its “close dialogue” with IRDAI throughout this process and into the future, to ensure the framework evolves to meet the needs of a modern, international insurance sector, which will be “essential” to support the continued sustainable growth of India’s economy. Newly appointed country manager Mr Garigiparthy will play a central role in the expansion of Lloyd’s in India. He has more than 23 years’ experience in financial services and was most recently regional compliance manager for Lloyd’s in Singapore. Commercial Risk Asia asked Mr Garigiparthy why Lloyd’s had applied for a license in the first place and why it did not just carry on as the market had for the last 100 years or so. Mr Garigiparthy pointed out that India today is the ninth largest economy in the world, with a GDP of more than $2trn in 2014. This is forecast to grow at a rate of 7% per annum from 2013 to 2030, making it the second largest economy in the world by 2050. Mr Garigiparthy also pointed out that India is the world’s second most populous country, with 1.25 billion people, and the world’s largest democracy, as well as sharing important linguistic and cultural links with Britain. He also said the Indian government has created a positive business environment. Lloyd’s believes the Indian insurance industry will therefore become one of the top ten insurance markets in the world by 2025. During that same period, Lloyd’s also estimates that India’s property and casualty insurance premiums will reach $80bn, a 540% increase from the current level of $12.5bn. Mr Garigiparthy explained that, based on the new regulations published by the IRDAI in March this year, Lloyd’s will be able to write reinsurance for all classes of general insurance business in India. He said the creation of a local onshore branch will provide Indian reinsurance brokers with local access to Lloyd’s’ “unmatched underwriting expertise and innovative reinsurance solutions for complex and specialist risks, including agriculture, infrastructure and disaster management”. Lloyd’s already has a significant presence in India, which it can build upon. Last year, Lloyd’s underwriters wrote $179m of Indian reinsurance business on a cross-border basis. Most of this business was written out of London with a small proportion written from its regional hub in Singapore. The biggest classes are property (mainly catastrophe and terrorism), along with offshore energy and marine cargo. Mr Garigiparthy believes that a physical presence in India will enable the market to bring its specialty skills, to help Indian insurers plug current gaps. This will in turn enable the insurers to better meet risk and insurance managers’ needs. “I believe that being located physically closer to the client means you get to understand the risks better. The underwriters in the Lloyd’s market are world-renowned for designing products that meet specific needs and close gaps in the market by working closely with brokers and clients,” he told Commercial Risk Asia. “We believe a Lloyd’s presence will contribute to the development of a more diverse reinsurance market, which is fundamental to the stability and future growth of the Indian economy. Lloyd’s will also help to position India as a centre for insurance, reinsurance and associated services,” added Mr Garigiparthy. He also told Commercial Risk Asia that the Indian government’s ‘Make in India’ initiatives will offer facultative reinsurance opportunities. “With an increasing corporate client base, casualty classes will also continue to emerge and we look forward to developing these classes by working closely with our clients and brokers. Similarly, the government’s investment in infrastructure is reigniting the marine and energy markets,” he explained. There are naturally still uncertainties about how the opening up of the Indian reinsurance market will pan out, as it is still very early days. But given the success of the creation of the Lloyd’s platforms in Singapore and China, it is highly likely that the market will follow a similar route in India. Mr Galigiparthy was not able to confirm exactly how Lloyd’s would operate in this huge market but strongly hinted that the Singapore model would be replicated if possible and viable. “Lloyd’s always takes a long-term view in respect of any of its operations and India is no different, given its significant growth potential. The IRDAI has allowed for Lloyd’s to set up a market model in India, with co-located service companies along with the Lloyd’s representative office, similar to the Singapore platform,” he said. “In order to be able to gain access to Indian reinsurance business on the same basis as other foreign reinsurers in India, our underwriters will need to set up service companies in India, with appropriate underwriting expertise on the ground,” continued Mr Galigiparthy. “We will continue to work with our market participants in London and Singapore, with a view to enabling our underwriters to establish a local presence in India under the Lloyd’s India platform,” he added. “India is a strong growth market for Lloyd’s and we will develop our India platform gradually, with the introduction of more underwriting expertise across various classes of business over a period of time. It is worth noting that our Singapore platform developed over 16 years, and has grown from two to 25 syndicates since its establishment in 2000,” explained Mr Galigiparthy. India’s new regulatory regime is designed to ensure that the local reinsurance and insurance market essentially has first right of refusal. Indian authorities understandably do not want to open up to the international market and then see all the premiums and profits flow abroad. Mr Galigiparthy said he hopes that over time the current restrictions will be relaxed for the benefit of all. “Reinsurance works best when it can operate on an open basis, where risks can be exported internationally to reduce their concentration among domestic carriers and, in turn, boost capacity and by extension, insurance penetration,” he said. “The order-of-preference regime recently introduced restricts this important mechanism to some extent but we hope that as the regulatory framework develops over time, the choice of selecting domestic or international reinsurers will be decided by the cedant based on their business needs alone, rather than the regulatory regime,” explained Mr Galigiparthy. “Equally, we would hope that over time, the requirements specific to Lloyd’s, such as service company capital above the minimum capital set for a branch, including Lloyd’s India, will be brought in line with those for other foreign reinsurers to ensure we can operate as efficiently and effectively as our peers in India,” he added.

Lloyd’s applies for license and appoints country head in India as part of big expansion plan

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