The formation in Singapore of Lloyd’s Asia platform in the late 1990s came too late to make an impression in Japan and South Korea. By the time London capacity and capability arrived locally, the industry in those two countries had already developed long-standing relationships with major reinsurers in Europe, USA and Bermuda. Instead underwriters in Singapore set about building a business in the far smaller but more inviting ASEAN group of nations: Indonesia, Thailand in particular. That is until now. The emergence of China, a $25 billion reinsurance market, is today offering Lloyd’s another crack at the big time. An opportunity to prove that risk syndication and a highly specialist approach to underwriting can work not just in London, but also with scale in the emerging economies of the world.
The leadership at Lloyd’s are clearly taking the challenge seriously. After initially establishing a reinsurance presence in Shanghai in 2007; a direct Chinese licence was added in 2010. The Chairman John Nelson has made it his priority to attract interest in the Lloyd’s model from the major Chinese insurers, not least as a market for them to invest in to develop an international portfolio. Today 18 Lloyd’s businesses are represented in Singapore and with the recent addition of Brit and Kiln there are a further 8 now operating in Shanghai. Yet, despite all this effort, the Chinese business written at Lloyd’s whilst growing is still tiny: less than $100m across the Singapore and Shanghai platforms.
Meeting underwriters in Singapore recently, it was evident why the good intent towards China has not yet translated into a meaningful revenue flow. A number remain sceptical about the reliability of the placing information provided to them and the underlying business quality. As if to prove the point, that very week China suffered its worse factory fire for decades; a blaze at a poultry processing plant killing 119 workers; most of who reportedly died trapped behind blocked exit doors. An extreme occurrence perhaps but the horrific absence of even basic safety standards inevitably reinforce a view held in some quarters of the underwriter community that at best China is a step into the unknown or worse still a place to lose one’s shirt.
China is rapidly modernising and some of the negative perception may soon seem outdated. Nevertheless improvements in workplace safety; better enforcement of building regulations and a more disciplined approach to risk management are surely required if assets are to be insured profitably to international standards. As Lloyd’s leaders may soon discover, their good work thus far in obtaining licenses, opening offices and building commercial relationships will amount to little if underwriters have only a limited appetite to grow their business in China.