Open Market Model holds the key to Japan

Insurance and Reinsurance — By on December 5, 2012 at 2:36 PM

Ian Ferguson

Wed 05 Dec 2012 –  Lloyd’s Japan recently launched its Open Market Model, making it easier for Lloyd’s underwriters to access certain Japanese business, as well as opening up opportunities for the market’s managing agents and brokers. Iain Ferguson, Lloyd’s representative in Japan, explains how the Open Market Model will create opportunities

What benefit does the Open Market Model bring to Lloyd’s in Japan?  

The open market model provides a new and simpler process for all Lloyd’s managing agents (not just those signed up to Lloyd’s Japan) to underwrite risks of an international nature where a non-Japanese company is seeking a compliant local policy to insure the risks they control inside Japan.   In the past, managing agents had to register with Lloyd’s Japan in order to underwrite such direct business. Alternatively fees and/or a local retention would be passed to a local fronting company before the business was reinsured back to London. Now, using the open market model, the market can underwrite these subject risks from the box in London without dilution and can instruct issuance of the policy in Japan through Lloyd’s Japan.

What is Lloyd’s position in the Japanese insurance market?  

The market underwrites annually close to $1 billion of Japan market premium. Whilst most of this business comes to Lloyd’s in London as reinsurance via international intermediaries, a growing amount of Japanese business is written and retained locally by Lloyd’s Japan.  The Japanese market is dominated by large domestic insurers, so foreign insurers, including Lloyd’s Japan, have a relatively small market share.

We are, however, well placed to serve the needs of non-Japanese businesses looking to insure their interests in Japan and the open market model aims to play to this strength.

Are there more opportunities in the Japanese market for Lloyd’s?  

As mentioned above, Lloyd’s is a significant reinsurance supporter of the Japan non-life market. In addition, two of the largest three Japanese insurers are members of Lloyd’s and operate their own managing agents. With interests aligned in this manner, compared to the competitive positioning of most other foreign insurers, our relationship with Japanese insurance companies is of a more collaborative nature. This allows us to partner with domestic insurers on product development and joint marketing initiatives.

Joint initiatives tend to focus on specialised classes or sub-classes of risk, where domestic company underwriters feel they do not have sufficient expertise or experience, such as kidnap & ransom, products recall risks with North American exposure, or environmental liability. There are, however, other areas of opportunity which are more aligned to industry type – a good example would be renewable energy risks. At a more general level there is a large Small – Medium Enterprise (SME) market in Japan which is serviced with only very basis coverage and this may bring opportunities for Lloyd’s underwriters to supply more modern and targeted policies.

Will the Open Market Model provide access to these opportunities?  

At this stage the open market model focuses on risks of an international nature where a non-Japanese company is seeking a compliant local policy to insure the risks they control in Japan.  By working closely with managing agents, brokers and certain Japanese intermediaries, our aim is to extend the open market model further in 2013 to cover pure Japanese risks through the provision of pre-syndicated Lloyd’s capacity and expertise to the Japanese market.

The Open Market Model… the benefits in brief :

  • Removes the need for managing agents to sign up to Lloyd’s Japan Inc.
  •  rokers can place subject  Japan risks through their normal placement processes, using any managing agent and the full strength of the Lloyd’s market
  •  Increases access to Japanese business for the Lloyd’s market
  • Enables managing agents to retain more business within the Lloyd’s market

(source: Lloyd’s of London website)

 

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