Lloyd’s India has been given the go ahead by India’s insurance supervisor, subject to a long list of conditions set as draft proposed regulation, before final approval.
A document published Friday by the Insurance Regulatory and Development Authority of India (IRDAI) outlined details for Lloyd’s India operation.
“Consequent upon promulgation of Insurance Laws (Amendment) Act, 2015, Lloyds UK has been permitted to set up branch office in the country,” the IRDAI said.
“This necessitates the Authority to notify fresh set of regulations for this category of insurers. Accordingly, the regulations have been drafted and placed on the file,” said the regulator.
Syndicates, members, and services firms forming Lloyd’s India will be granted recognition by IRDAI through a certificate of registration, according to the IRDAI.
“Lloyd’s UK shall set up Lloyd’s India, that will be granted certificate of registration to set-up market and associated structures for conduct of reinsurance business in India and outside India,” continued the announcement.
Approval for constituents will be a two stage process, according to the regulator, with two categories available for Lloyd’s to submit for approvals, one for reinsurers and the other for other firms – presumably intermediaries and services providers.
There are some heavy financial hurdles for reinsurers to clear in order to meet the Indian regulator’s standards.
They will need to have been writing reinsurance business for at least ten years already; they will need net owned funds of about £498.2m ($757m); and they must “infuse a minimum assigned capital” of £9.97m ($15.1m) into Lloyd’s India (based on current foreign exchange rates with the Indian Rupee).
“We look forward to working closely with IRDAI to ensure the requirements are appropriate to accommodate Lloyd’s unique structure, on an equal footing with other reinsurers, and to managing a quick and smooth transition," said Nelson.
In addition to the above reserving requirements, working within one single office building, and “minimum credit rating of at least good”, the IRDAI is also keen to stress Lloyd’s India must be able to draw on the market’s central fund in London.
“One of the important conditions governing approval of Lloyd’s India is the commitment given in the letter of comfort by Lloyd’s UK and access to the Central Funds of Lloyd’s UK with respect to Lloyd’s India,” said the Indian regulator.
The rules also specify that “each syndicate shall maintain a minimum retention of 50% of the Indian reinsurance business”, putting limitations on retrocessional arrangements.
Brokers will also need to comply with the IRDAI’s existing rules for Indian brokers, while the draft regulations also provides provisions for Indian companies to set up service companies that meet Lloyd’s India’s specified criteria.
“All stakeholders are requested to offer their comments / suggestions on the proposed regulations for consideration of the same by the department,” said the IRDAI.
The deadline for comment is November 27 2015, said the regulator.
Nelson added: “Lloyd’s fully expects to continue to provide its important reinsurance services to Indian cedants as it develops an onshore presence in India."