Llyod’s insures its passage to India

Changes in the Insurance Act, 1938, have become necessary as Lloyd’s is a society and not a company — the only one at a global scale that underwrites, especially re-insurance risks.

The current Insurance Act only permits companies to sell products in India. The changes in the Act will allow this society of underwriters to enter the re-insurance business on its own or form a JV with any Indian partner. But, the one-off change will benefit only Lloyd’s and not any other society. Meanwhile, global re-insurance companies like Munich Re and Swiss Re are also keen to set up branches in India.

The re-insurance business in the country is estimated to be of Rs 4,800 crore. According to the Government sources, the proposal to open up the market, that was on the backburner for quite some time, is back on the table. It is expected to be cleared soon. “The amendments were proposed almost a year ago, during the omnibus review of the Insurance Act. Since the amendments also contained a proposal to hike foreign direct investment in the sector, it could not garner the support of the Left parties in Parliament. But the stand-alone amendment is likely to be passed,” said a government official.

Insurance companies often further insure large risks with bigger entities to spread out losses. This ensures that a large loss like the 911 does not make insurance companies bankrupt. This pooling of risk is known as re-insurance. Lloyd’s, established in 1688, has the longest experience of undertaking such business, which requires highly specialised underwriting skills.

Lloyd’s general representative for India Shrirang V Samant said, “we regularly interact with the Irda and the government, with the ultimate objective of securing full entry into the market. We would obviously like to expand our presence to a full-fledged business operation, which depends on certain legislative changes.”

What is re-insurance?

Insurance companies often further insure large risks with bigger entities to spread out losses. This ensures that a large loss like the 911 does not make insurance companies bankrupt. This pooling of risk is known as re-insurance.

Why the Change?

• Changes in the Insurance Act, 1938, was necessary as Lloyd’s is a society and not a company and the Insurance Act only permits cos to sell products

Who will benefit?

• Changes in the Act will allow Lloyd’s to enter on its own or form a JV with any Indian partner. But the one-off change won’t benefit any other society