“China and India have seen growth in the demand for liability insurance”
Markel International is a subsidiary of $25.8 billion Markel Corporation, a US-based holding company and operates across the Asia Pacific region. The company has plans to venture into India
How do you see the liability risks scenario in the Asian economies?
The general liability risks scenario for India is viewed as low. However, this can be deceiving if applied across all of liability exposures as certain exposures at a primary level such as Directors & Officers Liability (D&O)/ Employment Practice Liability (EPL) in the United States of America (USA) that can cause a multitude of problems. Coupled with the legal system in certain countries, that can be drawn out when making final decisions and also with the fact that there is no case law in certain countries, reactionary decisions can be made.
Which are countries that are seeing larger demands for such (liability) products and which segments? As all Asian countries continue to grow their respective economy’s gross domestic product (GDP), the necessity of liability insurance will grow alongside this economic growth. The foreign shareholders and foreign owners of companies will demand that the manufacturers, exporters of companies, are adequately covered by insurance for negligence, and wrongful acts.
First world countries where manufactured products end up being sold in, demand insurance for circumstances that could give rise to injuries to persons, or damage to buildings. China and India have seen growth in the demand for liability insurance. They have both changed their respective regulations so that foreign insurance companies can more than ever, easily transact “in country” as it is anticipated that the knowledge base and products on offer in the liability insurance space by foreign insurers can assist local markets in the demand foreseen.
Which Asian country has the largest demand for such products?
China has an established insurance market for liability products, with a consistent demand over the years. Manufacturing has slowed a little but as USA’s exposure remains, so does the desire for reinsurance by the state-owned enterprise (SOE) insurers and more local insurers. India’s growing economy will result in the need to purchase product liability and we are looking to take advantage of our new position on the Lloyds Platform that was recently opened in Mumbai.
We believe we will have to manage expectations with regards to pricing in India as margins on underwriting profit has been hard to establish as past year results bear out. Vietnam, Cambodia and Thailand offer an opportunity for the product liability to lay the foundation but unless the ultimate seller of the product demands that product liability is purchased by the manufacturer, little interest in insurance will remain.
What kind of capacity re/insurers are offering in professional, commercial and product liability? Currently, capacity is not much of an issue with regards to professional and commercial liability business. Product liability risks can be more of a challenge when USA exposures are in play but outside of that, again the clients’ limits purchased can be easily met.
How do you see the premiums in these segments now? Is it expensive or cheap?
Pricing is competitive when considering pure Indian risks but these we consider acceptable currently. However, we feel that the correct price is not reflected when USA exposures are covered.
What kind of gap is there between non-insured losses and insured losses in this segments?
This is very difficult to assess as seldom do companies publicise the losses that they have suffered. My guess is that a lot of claims advices are swept under the carpet and not professionally dealt with. This is unless a claim is bought in countries such as the USA – why an insurance policy is purchased when exposures exist there.
Are there demands for covers for Reputation Risks? Is it taken independently or a part of larger liability policies?
No comments on this as we do not offer covers for Reputation Risks or extending such cover under any of our liability policies. It is believed demands for product liability is growing in Asian markets. Why and how? Production cost in most Asian countries remains competitive relative to the North American and European markets, hence Asia still remains a production hub for many brands. In addition, to protect their balance sheet and reputation in dealing with customers’ claims on products default, vendors often require their suppliers to carry product liability cover. We have seen a lot of product recalls by automobile giants in recent times.
Is it possible for you to give us some idea how the market is functioning in this segment in terms capacity, premium and claims?
No comments on this as we do not do standalone recalls. Having said that, there are only limited markets offering recall cover for automatic parts.
Are the companies taking country specific policies or one policy covering many markets?
I would suggest that country specific is more commonly taken unless the insured is a multinational such as Tata. How do you see Indian market? We see a great opportunity for us to help educate and develop our book of business in India. We do not intend to offer further capacity in classes that are under significant stress due to overcapacity. With changes in regulations made recently and further ones to be made, we anticipate focusing on niche classes where our capacity will be appreciated more. Trade Credit along with product liability will eventually offer this we believe.
Do you think awareness about these liability products are happening with the growth of the Indian market?
I believe that the more expansive the manufacturing sector becomes in India, the more awareness there is on the insurance products.
Which are the products that are in demand in Indian market?
We receive enquiries on a daily basis from India across all the liability lines we write. Cyber has been highlighted by the authorities in India as a product that should be purchased, especially in the financial sector. We are keen to support this as long as we fully understand the risks involved and have the appetite for that particular sector.
Do you think there are lot of losses and claims happening in liability segments and paid without litigations in India ?
In view of the Indian Evidence Act, we understand that many losses and claims are resolved out of court – by means of mediation or alternative dispute resolution (ADR). Furthermore, the expense and the protracted nature of court proceedings in India deter both parties in going through the court route; so parties often opt for mediation/ADR. Whilst current level of claims activity in India is relatively low compared to jurisdictions such as Australia and USA, we anticipate that the situation may change with the class action regime under the new Companies Law Litigation. For example, a new court has been set up for handling of insurance claims. Though still in its early stage of development, parties are being sanctioned (as a matter of case management) for causing delays during proceedings.
Can you provide more information on this newly set up court in India and how parties are being sanctioned?
Under the new law passed in 2015 (Insurance Laws (Amendment) Act, 2015), a commercial court and a commercial division in the High Courts for adjudicating insurance claims over Rs 1 crore have been established. We understand that the system started functioning in a few major cities in the last few months however, this is still at its early stages as infrastructure and dedicated judges are still being put into place. Sanctioned means costs order against the offending party
After having an office in India, will Markel still underwrite business in Singapore?
Should Markel open an office in India on the Lloyds platform, it will certainly retain its presence in Singapore as it is the hub of its Asian operations where its Malaysia, Hong Kong and China offices report to.