Lloyd?s of London will finally be able to do re-insurance business in India. The government is expected to clear the passage for the largest re-insurance entity by amending the Insurance Act, 1938.
The Cabinet would soon take up a proposal to facilitate Lloyd?s entry. The re-insurer?s arrival will break the monopoly of state-owned General Insurance Corporation. The finance ministry has cleared the amendments.
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. But the 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 worth about Rs 4,800 crore.
Government sources said, the proposal to open up the market was on the backburner for quite some time, was back on the table. It is expected to be cleared soon. A government official said, 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 from 26%, it could not muster the support of the Left parties in Parliament. But the stand-alone amendment is likely to be passed.
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 India representative SV Samant said, ?We interact with the Irda and the government, with the ultimate objective of securing full entry.?