[The Times (UK) Website]Lloyd’s welcomes first Chinese insurer
Lloyd’s of London notched up a landmark yesterday as it awarded its first ever licence to a Chinese-owned insurer to operate as a fully independent entity on the 326-year-old market.
China Re, which is joint owned by the Chinese government and Central Huijin Investment Corporation, the country’s sovereign wealth fund, will be able to start underwriting policies on the London market from the beginning of next year.
The China Re Syndicate, which will be known as Syndicate 2088, is expecting to write about £120 million of premiums next year and will concentrate on property and marine markets, as well as some tailor-made specialist cover.
China Re’s big area of expertise is reinsurance, where underwriters take on parts of policies already written by other insurers, typically the most extreme risks.
It is the largest reinsurer in China as is ranked as the world’s eighth-largest player, based on its gross written premiums last year of $7.9 billion.
Lloyd’s has been determined to make greater inroads into the Chinese market, one of the most potentially lucrative insurance opportunities in the world.
By granting the licence, it hopes that China Re will bring more local companies to the Lloyd’s market in search of cover, as well as providing cover for domestic businesses with links to China.
Li Peiyu, the chairman of China Re, said: “Our long-term strategy is to increase our activities in the international markets, and we look forward to working with international clients and their brokers placing business in the Lloyd’s market.”
China Re has been operating a joint venture on Lloyds since November 2011 with Catlin, one of the market’s biggest companies. Its plan was to be able to operate on its own by next year so it has received approval from Lloyd’s just in time to ensure it meets its target.
In order to qualify for the licence, it will have had to convince Lloyd’s that it had a viable business plan, enough capital and sufficiently qualified staff to operate independently on the open market.
Catlin will initially manage Syndicate 2088, but the plan is for China Re to take sole charge of the operation in time.
While licensing its first Chinese operator is clearly a boon for Lloyd’s, it does little to address the criticism that it is failing to make sufficient inroads in a string of overseas markets, including China.
A report published this month by the London Market Group and Boston Consulting found that London’s share of the Asian insurance market is only 2 per cent.
Up to 40 per cent of the commercial premiums currently written in London could evaporate, the report argued, as companies increasingly opt to use local insurers and reinsurers to supply their cover.
Lloyd’s counters that it has been making steady progress with markets such as China. It opened a representative office there in 2000, was granted a licence to reinsure in 2007 and was licensed to write business directly from Shanghai in 2010.
This year, it was given a second branch licence, in Beijing.