Lloyd's approval to set up an onshore reinsurance operation in China is good news for everyone, says Lord Levene.
The recent announcement that Lloyd's has won approval to set up an onshore Chinese reinsurer offers Lloyd's underwriters a strong foothold in the world's fastest growing economy, while providing Chinese insurers with unparalleled access to the significant specialist underwriting expertise at Lloyd's.
Lloyd's underwriters have provided offshore reinsurance to China for some time. The importance of the recent deal is that it enables Lloyd's to reinsure local currency business, which comprises nearly 90% of the total Chinese market.
And it is a market that is growing extremely rapidly along with the economy. China's economic output is forecast to be the largest in the world by the end of the 2030s. In 2004 alone, its economy grew by 9.1%, twice as fast as the US. Much of this economic development is taking place in areas of catastrophe risk and exposure, such as earthquake, flood and windstorm-prone areas and coastal regions. Lloyd's will ensure that this risk is properly managed. The market has a clear focus on underwriting for profit, being selective about the business it writes, and spreading the risk throughout the market to ensure that it is not over-exposed.
All lines of specialist business will be crucial to China's development, and Lloyd's foresees demand increasing significantly for specialist liability, property risks, and business interruption.
Lloyd's will be operating in China through a wholly-owned subsidiary called Lloyd's China Reinsurance Company Limited. Over the coming year it will put in place the operating details of that company.
No-one would pretend that the financial benefits to Lloyd's will materialise overnight. The Chinese insurance market is still in its infancy, but in the years to come it will develop into one of the most important in the world. This, therefore, is very much an investment for the future.Lloyd's has considerable global influence and reach, but it can never be complacent. It is simply inconceivable that Lloyd's could maintain and grow its global reputation without playing an active role at the heart of China's development.