GIC Re plans to be part of Lloyd's in three years

Have begun small steps on that front, says CMD A K Roy

General Insurance Corporation of India (GIC Re), India’s sole reinsurer, plans to be part of specialist insurance market Lloyd’s London in three years. A K Roy, chairman and managing director of GIC Re, said the company had already started taking steps towards this.

“Being a part of Lloyd’s would supplement our vision of becoming a global reinsurer. We are studying the market, meeting players and engaging in understanding the dynamics and identifying the way forward. We believe three years is a good time for achieving this objective,” Roy said.

Insurance brand Lloyd’s is a market in which members join as syndicates to insure risks. Much of Lloyd’s business works through subscription; more than a syndicate takes a share of the same risk. Business is conducted face-to-face between brokers and underwriters. At Lloyd’s, there are two distinct parts: The market, which comprises many independent businesses, and the Lloyd’s corporation, which oversees that market. Both entities are distinct, though they often work together.

GREENER PASTURES

• Lloyd’s is a market in which members join as syndicates to insure risks
• Business is conducted face-to-face between brokers and underwriters
• Lloyd’s has 2 distinct parts—the market and the Lloyd’s corporation
• The Lloyd’s market is home to 57 managing agents and 87 syndicates
• Once an entity comes within the Lloyd’s fold, it secures an instant ‘A’ rating

The Lloyd’s market is home to 57 managing agents and 87 syndicates, which offer unrivalled specialist underwriting expertise and talent. The governance structure and rules under which Lloyd’s operates are defined by the Lloyd’s Act, 1982.

Once an entity comes within the Lloyd’s fold, it secures an instant ‘A’ rating, a major advantage. Even as the European Union is postponing the implementation of the Solvency-II insurance regulations from 2015 to 2016, Lloyd’s is already Solvency II-compliant.

GIC Re posted a profit after tax of Rs 2,345 crore for 2012-13, compared with a loss of Rs 2,469 crore for 2011-12. Currently, the reinsurer is studying the catastrophe bond (cat bond) market. “Here, there is a lot of work to be done. The US has a developed market for cat bonds. This can be a potential instrument for risk transfer in a cost-effective way. We have to study this model to see whether it results in savings and efficient risk transfer. If it does, we will enter the market. This could either be in the US, India or a combination of both,” Roy said.

In September, GIC Re, along with the Federation of Afro Asian Insurers and Reinsurers (FAIR), launched the Nat Cat (natural catastrophe) Reinsurance Pool. GIC Re is the manager of the pool, which is backed by 14 insurers and reinsurers from Asia and Africa. Initially, the pool would have a capacity of about $21 million. Roy said the pool would begin the underwriting process from January 1, 2014.

The pool was aimed at addressing the losses from the increasing number of natural catastrophes in the Afro-Asian region and the subsequent hardening of natural catastrophe reinsurance rates. FAIR membership costs $1,300 a year and all FAIR members can be part of this pool. Currently, FAIR has 196 members.

“Private general insurers in India would be at an advantage if they join FAIR. It provides capacity without having to spend money on intermediaries. Other nuances of this pool are being worked out,” Roy added.

Going forward, this year GIC Re is also looking to enter the South African market and setting up a representative office in Brazil. According to Roy, the focus is on identifying more international markets that have long-term prospects.