Syndicates Increasingly Using Lloyd’s China Platform

February 4, 2013

“A growing number of syndicates are using Lloyd’s platform by placing their own underwriters in China,” says an article on the Lloyd’s website. “This, along with a license granted in 2012 to underwrite direct business, are encouraging developments which should bring real benefits in the long term,” said Eric Gao, Chairman and CEO at Lloyd’s Insurance Company (China) Limited.

Lloyd’s said “total premiums from China-based business – written from London, Singapore, Hong Kong and Shanghai – have grown from $70 million in 2007 to around $300 million in 2011.”

“Lloyd’s China, which provides underwriters with a platform in Shanghai, is playing an increasingly important role in growing Lloyd’s China premium,” Gao continued, speaking ahead of a Market Presentation at Lloyd’s in London on January 31, 2013.

In January Kiln joined Lloyd’s China, bringing the total number of managing agents on the platform to seven. A further two managing agents are planning to join Lloyd’s China in the first quarter of 2013, Gao indicated.

“China’s continued economic prosperity is a huge attraction, particularly at a time when Western economies are struggling to achieve any level of growth,” said Neil Wray, Regional Managing Director for Kiln in Asia, which already has operations in Singapore and Hong Kong.

“This is the first step of a long term strategy for Kiln in China as we look to build our business with Lloyd’s (China). The benefits will come from tapping into China’s economic growth, which will act as a catalyst for insurance demand, and the distribution of Kiln’s specialty reinsurance product offering. The medium to long term prospects are really exciting,” he added.

Having a local presence will give syndicates an edge, Gao explained. “Lloyd’s China gives managing agents an opportunity to have a physical presence in China – allowing them to work with the local brokers, building relationships and getting closer to the risk.”

The article notes that the platform is capitalized by Lloyd’s, which means managing agents do not need to provide separate capital. Lloyd’s China also provides office space and administrative functions. “The platform also looks after relations with the Chinese insurance regulator, taking care of regulatory reporting and compliance.”

Wray described the set-up as “extremely accessible and efficient for Lloyd’s syndicates wanting to access the China market.”

The emerging Chinese insurance market also dovetails with Lloyd’s Vision 2025, as it “sets out a clear strategy for the future with China as one of the top priorities,” said Gao. “As Lloyd’s General Representative for China my role is to boost growth in Chinese premiums, whether they are underwritten in London, Lloyd’s Asia in Singapore or Shanghai.”

Lloyd’s has been writing reinsurance in China since the market opened up in the 1970s, and established Lloyd’s China in 2007 as a platform to help managing agents access the market.

In May 2010 Lloyd’s China received a license to write direct business, in addition to its existing reinsurance licenses. Gao explained that the direct license is an important step for Lloyd’s in China and is a big opportunity for the market’s underwriters in the long term.

The article notes that, “despite a fragile global economy, China’s economy grew at almost 8 percent in the fourth quarter of 2012, a figure that it is expected to be exceed this year.”

Economic growth has underpinned the rapid expansion of the country’s insurance market, which has grown in both size and maturity, Gao added. Growth in China’s insurance market remains stable with non-life insurance premiums increasing by around 15 percent in 2012 to RMB533bn, almost double the growth rate of GDP.

Insurance premiums are also being boosted by China’s growing middle class. Gao explained that the “increased affluence brings demand for specialist insurance products. These include fine arts insurance, jewelers block, cover for high value vehicles, bloodstock and increasingly for private jets.

“A growing consumerist middle class, coupled with an evolving legal system, is also creating new liabilities, which in turn drives demand for specialist casualty insurance products like product liability, public liability and Directors and Officers insurance,” he added.

Demand for specialist commercial insurance is also being driven by the increase in foreign direct investment as well as the expansion of Chinese companies overseas and into more high-tech sectors. Lloyd’s said Gao believes “as Chinese companies expand there will be more demand for the types of products Lloyd’s underwriters excel at.”

Source: Lloyd’s of London

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