Lloyd’s Launches Malaysian Subsidiary

Lloyd’s Chairman Lord Peter Levene made a trip to Malaysia’s capital Kuala Lumpur to help launch the London Market’s new subsidiary there, Lloyd’s Labuan Limited, and the upgrading of its reinsurance license.

Lloyd’s bulletin explained that until now it “has operated in the region as a third tier reinsurer – receiving reinsurance business only if it wasn’t absorbed by the authorized Malaysian reinsurers or Labuan-based reinsurers, who together have a share of about 85 percent of the reinsurance market. But the new subsidiary will enable Lloyd’s to work more closely with local insurers to provide advice on specialist contracts.”

“The statistics and the skylines tell us beyond doubt that the world’s economic centre of gravity is moving eastwards, and as it does so, the size and importance of Asia’s insurance markets is starting to soar,” Levene noted.

He told an audience of insurance professionals: “Lloyd’s trading status as a licensed Labuan-based reinsurer will mean that we can work more closely with local brokers and insurers. We will be able to support the Labuan market better, working alongside you and providing advice where we can on how to write specialist contracts. Ultimately, we hope to help you bring a wider range of specialist products to the Malaysian market.”

Levene also said Lloyd’s is making strong progress on its plans for Asia, including the launch of a new operation in China which will provide onshore access to Chinese reinsurance business. It’s also opening a liaison office in India and expanding its Asia platform in Singapore.

“Although everyone is talking about China right now,” Levene continued, “it is by no means the whole story. The ASEAN countries also represent a fast-growing market which the insurance market cannot ignore, and Malaysia is a key economy at the heart of the region.”

He also took the opportunity to note that Lloyd’s was doing some initial work to consider its possible future role in the growing Islamic finance sector. “We believe that there are some potentially strong business opportunities in the Retakaful sector,” Levene indicated, “and that Lloyd’s could become an attractive platform for capital providers wishing to invest in this area. This concept, which is in the early stages of development, now requires extensive analysis of its legal, tax and regulatory implications to take it to the next stage.”

“Malaysia is a significant market in Asia,” said the Lloyd’s bulletin, “with total direct premiums in 2004 estimated at $6.5 billion, ranking above both Singapore and Thailand. Last year, Lloyd’s Malaysian reinsurance business totaled around $70 million.” Levene sees it breaking the $100 million barrier by 2010.

He hedged somewhat, however, in recognizing that “insurance is a cyclical industry and we currently live in competitive times. I am only too aware of the downward pressure in Asia once again on prices in some lines and in certain territories, which must inform underwriting strategy. But in the longer term it is difficult to envisage a global insurer being successful without access to Malaysian business and we expect to see healthy growth.”

In 2002, Lloyd’s Asia platform, based in Singapore, had two syndicates and wrote premium of $7 million. It presently has eight syndicates and writes around $100 million of premium a year.

Topics Excess Surplus Reinsurance China Lloyd's