Article img

The Insurer In Full: Is Antares’ Lloyd’s China exit latest sign of a wider trend?

Published by:
Topics: Emerging Markets Run-Off / Legacy Strategy Topical Trends

Antares’ decision to place the Lloyd’s China operation at Syndicate 1274 into run-off is the latest in a series of moves by market participants to rationalise international operations...

Although Lloyd’s had written Chinese reinsurance business since the 1970s, it was not until 2007 that the market received a licence for an onshore reinsurance operation in China. 

At the time, the Corporation saw international expansion, particularly in the Asia Pacific region, as a key to driving future growth. 

Lloyd’s China, which opened in April 2007, was seen as a key engine of this growth. 

Lloyd’s chairman at the time, Lord Peter Levene, spoke of a desire to double the percentage of Lloyd’s premium generated through Asia from 10 percent to 20 percent, led by the expansion in China. 

Levene viewed China as the “market of the future” and the rationale behind creating the platform was to improve access to the world’s second largest economy and build for the longer term. 

It had been a long path to get that far. Several years of intense lobbying failed to secure an onshore licence. It was only following a state visit from Chinese president Hu Jintao to the UK that a licence was finally secured (thought to be following a trade request from the UK government, although this was not formally disclosed). 

Lloyd’s China class of business mix as of 2019

Following its initial launch in Shanghai in 2007, Lloyd’s expansion in China continued. The market was granted approval to write direct insurance in the Shanghai region in 2010, with approval granted for a branch office in Beijing in 2014. 

By this point, Levene had been replaced as Lloyd’s chairman by John Nelson and the “Vision 2025” strategy was in place, with a goal of expanding further into emerging economies such as China. 

A host of managing agents joined the Lloyd’s China platform around this time, including the likes of Brit, Ascot, Markel, Talbot and WR Berkley. The licensing advantages of participating through Lloyd’s China without needing separate regulatory approval from the China Insurance Regulatory Commission tempted syndicates to explore growth opportunities in the market. 

Fast forward to 2021, however, and for many in the market, priorities have changed. Lloyd’s leadership focus has shifted back towards its core market in North America and many syndicates have been forced to rationalise operations following several years of poor underwriting performance. 

Many of the expansive moves made over the last decade or so are now being re-evaluated. When he addressed The Insurer’s London Insurance Forum in February 2019, Lloyd’s current CEO John Neal said “the days of office-building around the world were over”, highlighting the high costs of administration that can be incurred through establishing international hubs.

Since the arrival of Neal as CEO in 2018, which followed Bruce Carnegie-Brown replacing Nelson as chairman in 2017, there has been a marked shift in Lloyd’s approach.

Neal immediately stressed the importance of strengthening relationships with Lloyd’s largest market, the US, on his arrival.

And a need to strengthen underwriting performance has seen all syndicates exit less profitable areas of their operations.

In several cases, this has led to a reconsideration of how best to access risks in Asian markets.

In May 2019, AIG-owned Talbot Underwriting shifted business written from Lloyd’s China to its Singapore and London operations.

CNA Hardy’s Syndicate 382 disclosed in its 2018 statement of accounts that it would cease underwriting business through its Lloyd’s China and Singapore channels in a bid to improve “overall levels of profitability in 2019 and beyond”.

Hamilton Syndicate 3334 also announced in its accounts for the year ended December 2018 that it had exited Lloyd’s China. Compared to the rest of its portfolio, transactions through Lloyd’s China represented a “smaller revenue stream” than business written from hubs in the UK, Europe, North America and Australasia, it said at the time.

There have also been moves to exit Lloyd’s Asia in Singapore. Back in 2017, Starr Syndicate 1919 discontinued its Lloyd’s Singapore operation, transferring business to Starr International Insurance Singapore Pte, which was established in 2012. 

QBE announced plans to pull out of Lloyd’s Asia and bring all of its regional business under the QBE banner in 2019.

And ArgoGlobal Syndicate 1200 announced it was to cease underwriting operations in Asia in September 2019, ending its presence at the Singapore platform.

Given Antares’ announcement this week, these moves do point to an ongoing retrenchment from Lloyd’s Asian platforms – although data from 2019 shows there remain a healthy number of participants within the China operations.

It’s too early to determine whether these moves represent a marked trend, but the situation remains one to watch. Lloyd’s managing agents will continue to navigate cost pressures in the months and years ahead, and it is likely others will take steps to rationalise international operations if the premium generated does not justify the cost of maintaining these units.


For continued access to market leading content click here to enquire about a subscription to The Insurer. 

See more
See less
Share fluctuations
Munich Re
Enstar Group
Everest Re
The Hanover
Marsh & McLennan
See more
See less
Upcoming events