Insurance in Emerging Markets

2009 - 2010

www.clydeco.com
 Emerging Markets

Understanding this industry inside out is what makes the Clyde & Co insurance and
reinsurance practice a world leader, ranked top by both leading legal directories. More
than 60 partners work solely on insurance related matters.

Our depth of understanding covers all types of claims, corporate and regulatory advice.

All of our offices handle insurance and reinsurance claims work and that means a
geographical spread covering six continents. This genuine multi-jurisdictional
capability sets us apart from other insurance law firms.

Our knowledge and expertise has been brought together to provide an overview of
some of the key emerging markets for the insurance industry.

CONTENTS

Start-ups and raising capital 3

The Middle East 4-6

Latin America 7-8

Russia 9 - 10

India 11 - 12

China 12 - 13

Singapore 14 - 15

2 www.clydeco.com
Start-ups and raising capital
The (re)insurance markets have traditionally used the global
nature of their markets to develop into new territories and
emerging markets.
During the course of the 1990's overseas (re)insurers formed new syndicates at Lloyd's in order
to increase their scope of distribution and to tap into the underwriting market on a worldwide
basis. Capital has also flowed into Bermuda for, amongst other reasons, the regulatory and tax
regime on the island. Some of these start-ups were formed by underwriters from the London
market. The table has now turned full circle with some of those start-up players returning to the
London market to establish an underwriting platform in order, in part, to diversify their risk profile.
The next stage of this evolution of finding additional capacity in the worldwide market will be
through the development of insurance markets in places such as China, India and Russia.
These markets are starting to open up their doors to (re)insurance companies. Their premium
growth is being driven by factors such as the growing consumer class, increased foreign direct
investment, infrastructure development and an increased awareness of catastrophe exposure.

For example, the Chinese Insurance Regulatory Commission has predicted that demand for
(re)insurance is expected to reach US$13.2bn by 2010. With the rapid development of direct
insurance in China, the (re)insurance market is facing a corresponding growth spurt. It is
predicted that by 2010, direct insurance companies in China will be ceding US$8.7bn of
premium to (re)insurers of which US$5.2bn will be ceded domestically. This has led to
(re)insurance companies seeking to gain licences to conduct domestic business in China which
includes several (re)insurers like AIG, Munich Re, Gen Re, Swiss Re and Hannover Re. Lloyd's
themselves have continued to stress the importance of the opportunities presented by the
Chinese (re)insurance market ever since the establishment of Lloyd's China in 2007. There is
also a significant Lloyd's underwriting presence in China with Catlin, St. Paul Travelers, CV Starr
and ACE having arrived in Shanghai.

Another development occurred in April 2008 when Lloyd's announced that it had received
approval from the Superintendence of Private Insurance to become the first "Admitted" reinsurer
in Brazil. This followed legislative changes to open up Latin America's largest insurance market
resulting in several foreign reinsurers expressing an interest in entering Brazil as an admitted
reinsurer. Lloyd's decision to apply for a licence in Brazil recognised the growing strength of the
Brazilian economy and the opportunities presented for the (re)insurance industry. Indeed Lloyd's
has established its first Brazilian representative office in Rio de Janeiro and looks set to enhance
its presence elsewhere in the country over time in line with business development opportunities.

The opening up of these emerging markets to the (re)insurance world presents new challenges
to the (re)insurance industry. The market will need to assess the impact on capital when writing
significant volumes of business in economies where there may be little historic data available. At
the same time, Solvency II (although delayed now until 2012) is still rapidly approaching and the
(re)insurance market will need to deal with the technical challenges as they arise. In addition,
IFRS II may impact the balance sheet of (re)insurers with the requirement to move capital
around the balance sheet.

The growth of the emerging markets is also likely to accelerate the development and innovation
of capital market risk transfer products. The cat bond industry was extremely active during the
course of 2007. Also alongside the growth in cat bonds, the Industry Loss Warranty market
continued to move ahead. More recently there has been the re-emergence of contingent capital
deals giving (re)insurers the option to access capital on pre-arranged terms in the event of a
severe loss. The further development between the (re)insurers and the capital markets over the
underwriting of catastrophic risk will continue to converge as the (re)insurance markets march
along their path of globalisation.

Further information

Andrew Holderness
[email protected]
Tel: +44 (0) 20 7648 4486

www.clydeco.com 3
 The Middle East
Clyde & Co has extensive experience of Middle East insurance
business, operating from two offices in the United Arab Emirates
(Dubai and Abu Dhabi), an office in the Qatar Financial Centre and
an associate office in Riyadh in the Kingdom of Saudi Arabia.
What follows is a snapshot of some of the main markets that make
up this vibrant and unique region, which is experiencing high levels
of economic growth and has marketed itself as being a business
hub between Europe and Asia.
United Arab Emirates

The UAE currently has around 56 registered insurers. Recent developments include the
production of a draft directive concerning setting out a code of conduct for insurers by the UAE's
Insurance Authority, which is the regulator of all (non-DIFC) insurance businesses in the UAE.
The draft code has been circulated for public consultation, with comments from the industry
sought.

The Insurance Authority have also been due to issue their implementing regulations to flesh out
the overhaul of the federal insurance law that took place in 2007, and we understanding that
these long awaited regulations are currently being finalised by the Insurance Authority. At
present, old regulations issued under the framework of laws dating back to the 1980s co-exist
alongside the new law, which is not ideal.

It remains to be seen whether the new regulations will affect the moratorium imposed in
December 2008 by the Insurance Authority on licensing of new branches of foreign insurers
(which was later extended to new insurance intermediaries). Further it is also to be seen
whether the new regulations will affect the current requirements that require locally incorporated
insurance companies to be publicly listed and 75% owned by UAE nationals. Other areas that
are in urgent need of attention are the reserving regulations and rules to govern bancassurance.

Dubai (DIFC)

The Dubai International Financial Centre in Dubai (DIFC) was established as a Financial Free
Zone in 2004 and is exempt from onshore commercial and civil laws (although onshore penal
and anti-money laundering legislation applies). The DIFC has its own independent regulator, the
Dubai Financial Service Authority (or DFSA) and its laws have been drafted specifically for the
Centre, cherry picking from jurisdictions such as England and Singapore.

High profile participants at DIFC include Allianz SE, Chartis, Flagstone Re, Generali, Gulf Re,
Liberty, Lloyd's (Watkins Syndicate), Zurich, QBE, Marsh, Aon and Tokio Marine and the region’s
first dedicated retakaful company, Takaful Re who have established business presences in the
Centre.

2009 developments include changes to the DFSA Rulebook to allow Insurers (as defined)
operating in the DIFC to be able to insure “DIFC risks” (i.e. those situated in the DIFC) directly
as opposed to through reinsurance. Further in there has also been a change to the application
forms required to be submitted to the DFSA for authorisation and some of the elements of the
process, as well as amendments to the rulebook to allow more flexible arrangements for
Compliance and Anti-Money laundering reporting officers to be considered.

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Kingdom of Saudi Arabia

Insurance in Saudi Arabia is governed by the Law on Supervision of Cooperative Insurance

Companies ("the Law") and regulated by the Saudi Arabian Monetary Authority (“SAMA”). Saudi
insurers (but not reinsurers) must operate on a co-operative basis and incorporate as public joint
stock companies. There is no restriction on foreign participation, but current Saudi rules restrict
the transfer of shares so that only Saudi nationals can hold such shares. Depending on the
participants in the company, a range of between 25% - 40% of shares will need to be floated.

Since 2004, SAMA has undertaken a process where existing participants were invited to
restructure or to exit the market. This has led to around 30 insurers being approved by SAMA
for registration, and this process is nearing its end. Recent indications are that no further new
participants will be permitted, which may lead to renewed M&A activity as new entrants seek to
enter the Saudi market.

Foreign insurers can still access the marketplace through reinsurance. SAMA has recently
released for consultation draft Reinsurance Regulations, a Code of Corporate Governance
Regulation, Investment Guidelines and Broker Regulation as well as regulations for risk
management, anti-money laundering and anti-fraud measures. For reinsurers, the regulations
presently require that a Saudi-registered insurer retain 30% of total insurance premiums and that
a further 30% should be reinsured with a licensed Saudi reinsurer. The new Reinsurance
Regulations are not proposing to change that rule.

Qatar

The Qatar Financial Centre (QFC) was created in 2005 along similar lines to the DIFC. Its aim
was to establish a financial services industry to support the growth of Qatar as a state, and also
to act as a regional hub. It is based on a familiar FSA-model, and exempt from the majority of
local Qatari commercial legislation, the QFC is equipped with its own financial services regulator
(QFCRA), courts and tribunal staffed by appointees of the highest calibre. In contrast to the
DIFC, insurers setting up in the QFC are able to write direct, retail insurance business in the
Qatar market.

The QFC has already attracted AXA, Zurich, Alico and Chartis on the insurance side to register
there and brokers such as Nasco, AON, Marsh, HSBC and Nexus.

In July 2009, the QFCRA elected to review the method of remuneration for independent
insurance intermediaries offering products to retail customers. The review, which has received a
mixed response, is intended to focus on up front fee payments as opposed to commission
payments, and aimed at ensuring the impartiality of those intermediaries in offering the most
appropriate products to their retail customers and has been introduced on an ad hoc basis
(influenced by the recent UK FSA review in this area).

A social health insurance scheme for Qatar is currently being considered which is likely to impact
the sale of medical insurance in Qatar.

Bahrain

The Central Bank of Bahrain (CBB) is the integrated regulator of financial services in Bahrain,
including insurance. Volume 3 of the CBB's detailed Rulebook governs insurance regulation.

AIG Takaful, Hannover Re, and R&SA have set up in Bahrain, together with the first licensed
captive manager and insurer in the Gulf Region for UAE-based utilities company Tabreed, which
represents a significant development for the CBB and the region generally.

It appears that the CBB may not allow new entrants to the market undertake a mix of direct
business in the Bahrain market and reinsurance of Bahraini and other foreign business, despite
there being no explicit restriction on this in the CBB Rulebook. There are currently 11 licensed
foreign insurers operating in Bahrain with more expected to join them.

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 Other GCC developments

Oman’s Capital Market Authority (CMA) has continued its program of reform of insurance
legislation, including issuing a Code of Governance for Insurance Companies in 2008 and
detailed regulations for insurance interests. One important change introduced by the CMA was
the removal of the obligation on the lead local insurer to allow other national insurers to
participate in certain risks. However, there remains a requirement for national insurers to
demonstrate that national reinsurers cannot offer adequate reinsurance cover before placing
risks with foreign reinsurers. 2008 also saw the much-anticipated establishment of Oman Re,
which will increase the opportunity for reinsurance premiums to be retained within the Sultanate.
There was also a change in respect of capital requirements for branches of insurance
companies, introducing the requirement that capital must be held locally.

Kuwait has also announced its intention to revamp its existing insurance legislation, which is
long overdue as the current insurance law was passed in 1961.

Takaful business

A current area in which growth is projected throughout the GCC, is Islamic insurance or "takaful".
Ernst & Young presented a report on the future of takaful in April 2009 predicting total annual
takaful contributions could reach US $7.7 billion per year by 2012 (higher estimates of over
US$14 billion by 2010 have also been reported).

The growth already achieved is impressive when one considers that takaful contributions
(premiums) were reported as being US $1.4 million per year in 2004 rising to an estimated US $
3.4 billion in 2007, the majority of those contributions coming from within the GCC. It is helpful
to remember that global takaful contributions are less than 1% of the total insurance premium
spend annually, despite the fact that Muslims make up around 24.79% of the total global
population.

Inevitably there are questions as to what proportion of this population is accessible to insurers.
In the Middle East as a whole, the current level of GDP per capita is not currently reflected in the
insurance penetration rates. Life insurance remains particularly undeveloped and the
opportunity for family takaful to step into this role is extremely viable. For example, it is
estimated that the UAE is massively under-penetrated with insurance premiums in 2007 being
reported as 56% below GDP-adjusted levels in the non-life sector and 88% in the life sector.
Despite the challenges facing the takaful industry, there seems no reason why it should not be
the future means by which many more Muslims and non-Muslims around the world seek to
protect their lives, health, possessions and businesses.

Further information

Wayne Jones (Dubai) Abdulaziz Al Bosaily (Riyadh)

Regulatory / Litigation [email protected]
[email protected] Tel: +966 1 279 5212
Tel: +971 4 331 1102
David Salt (Doha)
Peter Hodgins (Dubai) [email protected]
Takaful / Corporate Insurance Tel: +974 4 967 434
[email protected]
Tel: +971 4 331 1102

James O'Shea (Dubai)

Corporate Insurance
[email protected]
Tel: +971 4 331 1102

6 www.clydeco.com
Latin America
Latin America has at various times in its history been described as
the land of the future and in this tradition it continues to offer great
business opportunities.

The region is experiencing a sustained period of strong economic growth, not least through its
exposure to the global commodity boom. Political and fiscal instability across the region have
eased in recent years, raising the level of interest of foreign investment, in particular in its
infrastructure needs and the exploitation of its natural resources. On 30 April 2008, Brazil was
awarded investment grade BBB by Standard & Poors, expected to result in a substantial influx of
overseas investment.

The establishment of common market areas such as the North American Free Trade Agreement
(US, Canada, Mexico) and Mercosul (a similar agreement amongst Brazil, Argentina, Uruguay
and Paraguay), with their associated tax benefits have further fuelled an increase in trade across
the region.

Opportunities and changes are also being experienced in the insurance and reinsurance
industries, with the volume of gross premiums now exceeding US$70 million.

The Latin American insurance market displays many of the characteristics of emerging
markets - most notably that of low insurance penetration. It is a relatively small market taking
into consideration its geographical size as compared to other markets but demonstrates strong
growth potential. Brazil and Mexico dominate the region, accounting for two-thirds of all
premiums.

Brazil is the largest insurance market in the region. With around 46% premium market share it
is more than double the second largest market in the region, Mexico, which accounts for 25%.

There have been various developments in investment in the insurance industry including more
risks underwritten by subsidiaries of North American and European insurers. There has also
been development in new distribution channels for insurance products such as banks and utility
companies generating new interest in insurance products. The growth of the banking industry
has led to large scale bancassurance in Argentina, Mexico, Chile and Brazil. Speciality lines
such as liability, surety, agriculture and engineering account for a significant percentage of new
growth in the region, in particular in Brazil.

Brazil's (re)insurance sector was given a boost in 2007 after the Brazilian authorities liberalised
the reinsurance market and ended the almost 70-year monopoly of the state owned reinsurers
IRB Brazil Re.

Complementary Law 126 issued in January 2007 brought to an end the IRB's monopoly and
provided a new reinsurance framework. Law 126 created three categories of reinsurers - local,
admitted and occasional, with local reinsurers (including the IRB) being given the right of first
refusal or "preferential offer" of at least 60% of the cedant's total reinsurance cessions in the first
3 years up to 2010, to be reduced to 40% thereafter.

In December 2007 the CNSP, the Brazilian National Council of Private Insurance, issued
implementing Reinsurance Resolutions 168 to 173. Resolution 168 which came into effect on 17
April 2008 is the main resolution and sets out the criteria for registration entry and operation of
reinsurers in the new open market. The reinsurance market in Brazil has now been open for
competition for more than a year. At present there are in excess of 70 foreign reinsurers
registered in Brazil.

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 Lloyd's of London is registered as an "admitted reinsurer". In general, indications are for the
establishment of a more mature and transparent (re)insurance market with great potential for
future growth. The reinsurance liberalisation and the country's continued economic
development is driving demand for new reinsurance products.

These changes are already acting as a catalyst for the development of further products. Mexico
has also amended its insurance laws to provide more strength and structure for the legal
framework relating to inter alia distribution regulation and capitalisation in respect of insurance
products and companies. Other countries are encouraging more foreign owned insurance
companies to be set up.

Clyde & Co has a commitment to the international insurance community, doing business in the
region with a strong local presence as well as a dedicated Latin American team in London.
Our lawyers advise on changing regulatory regimes in all countries in Latin America as well as
assist in setting up branches and representative offices in various countries for leading
international insurers and reinsurers.

Clyde & Co has been involved in negotiating terms of covers and claims handling and loss
adjusting procedures for reinsurers as well as structuring fronting arrangements enabling greater
protection and participation in local risks.

Clyde & Co's lawyers have been active in promoting internationally accepted terms, wordings
and dispute resolution models. We are involved in some of the major insurance and reinsurance
claims concerning the region, ranging from construction, engineering and operational risks and
financial guarantees in Brazil, credit risk disputes in Argentina, mining disasters in Chile, energy
and public utilities in Venezuela, Ecuador and Mexico and financial institutions and/or BBBs in
Colombia.

Beaumont & Son - Aviation at Clyde & Co is involved in all the major aviation cases in the
region. Our marine group is involved in some of the largest losses in the area including major
storm losses off the Gulf of Mexico.

Further information

Stirling Leech (Rio de Janeiro)

[email protected]
Tel: +971 4 331 1102

Martyn Plaskett (Rio de Janeiro)

[email protected]
Tel: +55 21 2217 7701

Elizabeth Leonhardt (London)

[email protected]
Tel: +44 (0) 20 7648 1643

8 www.clydeco.com
Russia
What a difference a year makes. Until the onset of the financial
crisis (the second half of 2008 in Russia) the Russian insurance
market had seen several years of consistent and rapid growth.
In fact, the Russian market had been the fastest growing amongst
the BRIC countries. The financial crisis and consequent collapse
in oil prices in particular, has hit the Russian economy hard, and
the insurance market has been no exception.
Recent Growth

2007/8 saw continued very dynamic premium growth as well as Russia's dramatic absorption
into the international insurance and reinsurance market in light of several massive investments
by international groups such as by Allianz, Rosno, Zurich and Axa.

By Spring 2008, the proportion of adults having a least one insurance policy exceeded 50% for
the first time. Estimates of annual premium per person ranged from US$100 to US$125, which
was substantially more than India and China but far behind that of other former Eastern Bloc
states (such as Slovenia with US$770). These figures reflected Russia's growing economic
strength and growth in absolute and disposable incomes in particular

Market growth was given a significant boost in 2003 with the introduction of compulsory third
party motor insurance. This (rather late) development enormously increased the population's
awareness and familiarity with insurance and provided a conduit for insurers to market other
forms of personal lines cover.

Russia became Europe's largest new car market in 2008, overtaking Germany. Many such cars
were purchased with finance, which of course also required the purchase of insurance. Russia
became IKEA's largest market in 2008, reflecting that Russians were investing in their
properties, often with secured finance, which of course often required the purchase of insurance.

In commercial lines, insurance was increasingly seen as a necessity rather than a luxury and
there had been particularly strong growth in the SME sector. The life sector remains very small,
reflecting Russians' continued reluctance to make long term savings and investments, and which
itself reflects the short pedigree of post-Soviet economic institutions, and continuously high
levels of inflation, amongst other factors.

Effect of Global Economic Crisis

The first half of 2009 saw GNP decrease by 9.8%, industrial production by 15%, export/import
operations by 44.5%, consumer prices by 13% and the rouble devalued by 30%.
Unemployment rose to 10%, the number of new cars sold reduced by 49% and property prices
have collapsed. Many large construction projects have been abandoned. Consequently the
predictions are that 2009 insurance premium levels will be about 2/3 of those of 2008.

Serious as they are these setbacks will almost certainly be of a short term nature. Insurance
has become embedded into the post-Soviet Russian economy and there remains vast room for
growth in the sector over the medium term. There are still millions of uninsured Russians and
properties. It is also worth remembering that before the 1917 revolution Russia was the second
largest insurance market in the world. When Russia emerges from the current economic
situation, the insurance market will also recover, probably in a much more consolidated form.

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 Regulation

A proper insurance regulatory structure is now in place and legislation since 2004 has, for
example, required increases in capital reserves, required brokers to be licensed, prescribed how
assets are to be allocated, and required the separation of business lines. Minimum capital
requirements however remain very low indeed in absolute terms, with the consequence that the
market still has a disproportionate number of licensed insurers.

The number of insurers continues to steadily decrease as businesses merge and poorly
capitalised and illegitimate players fall by the wayside. By the end of the first half of 2009 there
were 743 insurers in Russia (90 less than in 2008), but in reality the market is highly
concentrated with the top 10 insurers taking 53% of premium income.

There have been few significant regulatory developments in 2008/9. Alexander Koval, formerly
president of the insurers' professional body (ARIA) was appointed head of the Federal Insurance
Supervision Service in May 2009. He is a well known and respected figure and it is reasonable
to expect continuing regulatory refinement under his charge. There is continuing legislative
discussion about making insurance compulsory in a broader range of sectors. Mr Koval
announced in September 2009 an intention to raise the minimum capital requirement to 80 - 90M
roubles (US$2.7M - $3M appx), from 30M roubles (US$1M). This should further increase the
rate of consolidation.

Major Losses 2009

In terms of major losses, all eyes have been on the major accident on 17 August 2009 at
RusHydro's Sayano-Shushenskaya dam, the 6th largest in the world. An explosion was followed
by massive water ingress destroying the turbine hall and several of its 10 turbines. 74 people
were confirmed dead and power was cut to nearby towns and industry, including 4 of Rusal's
aluminium smelting plants. This incident may be the largest insured loss in Russian history.

Clyde & Co in Russia

As with all emerging markets, a number of special issues need to be confronted by anyone
conducting business in Russia; Clyde & Co has the local and international expertise to assist.
Clyde & Co has been active in Russia since 1992 when it established a St Petersburg office in
association with Musin & Partners.

In 2005, Clyde & Co opened an office in Moscow and which supports all our offices, in our core
areas of insurance, shipping, international trade, corporate and securities law.

The London and international offices are extensively involved in multiple major Russian related
transactions and litigation around the globe.

Insurance work is typically co-ordinated in London, with assistance from Moscow.

Further information

Andrew Tobin (London)

Legal Director
[email protected]
Tel: +44 (0) 207 648 1744

John Whittaker (London)

Senior Equity Partner
[email protected]
Tel: +44 (0) 20 7648 1685

10 www.clydeco.com
India

The Indian insurance market has undergone a transformation in

the last decade after the sector was thrown open for private sector
participants. Despite the presence of many international insurance
companies, the Indian insurance market remains significantly
under-exploited and thus offers opportunities to both, the existing
players and potential entrants.
State policy can be attributed to the belated growth of the insurance sector. Soon after
independence the life insurance business was nationalised followed by general insurance
business. The big bang economic reforms of 1991 eluded the insurance sector as the
government wanted to tread cautiously. State monopoly continued until 1999 when the
government decided to introduce reforms by allowing private companies to carry on insurance
business in India. The Insurance Regulatory and Development Authority (“IRDA”) was formed
under the IRDA Act, 1999 as a regulator to protect the interest of holders of insurance policies
and to regulate, promote and ensure orderly growth of the insurance industry. However, foreign
investment in the insurance sector was capped at 26%.

Insurance industry is regulated under the provisions of the Insurance Act, 1938, the IRDA Act,
1999 and the rules and regulations notified by the IRDA. The IRDA has been conferred with
powers and function relating to the regulation of insurance companies and insurance
intermediaries like insurance brokers, surveyors and loss assessors and agents. IRDA regulates
investments of funds by insurance companies, maintenance of solvency margins, social sector
obligations of insurers and adjudicates disputes between insurers and intermediaries. IRDA
stipulates guidelines and code of conduct with the objective of protecting policy holders.
Licenses are necessary for insurance brokers, insurance agents, loss assessors and surveyors,
third party administrators and other such insurance intermediaries. Further the principal officers
or designated persons of such intermediaries must also possess the prescribed qualifications
including practical training in some cases.

Currently 22 life insurance companies and 21 in general insurance companies are licensed to
carry out their respective insurance businesses in India. All insurance products are subject to
File and Use guidelines, whereby insurers are required to submit the proposed insurance
products to IRDA for approval before selling such insurance products to consumers. The
general insurance market has for the most part been de-tariffed since 2007.

Notwithstanding the reforms introduced in the insurance sector, insurance companies have been
asking for further de-regulation. Successive governments since the opening up of the sector for
private players have acknowledged the need for further reforms. However, most proposals for
reform have been trapped in legislative quagmire since the government did not seem to have
the political will to push these through inter alia due to opposition from coalition partners. The
Insurance Laws (Amendment) Bill 2008 (“the Bill”) is still pending in the Parliament. The Bill
inter alia proposes to allow foreign investors to hold up to 49% of the capital in an Indian
insurance company. It also paves way nationalised general insurance companies to raise funds
from the capital markets.

The Bill provides for appeals against decisions by IRDA to lie with the Securities Appellate
Tribunal set up under the Securities Exchange Board of India Act, 1992. Among other proposals,
the Bill also provides for Lloyd’s of London to be included within the definition of a foreign
company and is thus likely to open doors for Lloyd’s of London’s entry into India. The mandatory
requirement for Indian promoters of an insurance company to reduce their stake to 26% over a
period of ten years is also proposed to be dropped. The Bill proposes to permit permits a
policyholder to completely assign all rights under the policy to a third party subject to conditions
and prescribes stricter penalites for insurers that fail to meet social sector obligations.

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 Insurance sector exhibits immense potential for growth. As per the Investment Commission of
India, the Indian insurance market is expected to grow at a compounded annual growth rate
(CAGR) of over 30% per annum.

Even with the life insurance sector clocking a growth of over 20% in premium in the fiscal year
2009, the penetration level of life insurance remains at about 4% of the GDP as against the
global average of over 7%. Higher disposable income, aging population, no universal life cover
and tax benefits to life insurance products make life insurance market an attractive proposition
for insurance companies seeking expansion. On the other hand despite even in face of an
average annual growth of about 16%, the penetration level of general insurance business in
India is less than 0.60% of the GDP as against the global average of 2.14%. Untapped rural
markets, lower consumer preference and constrained distribution channels are understood to be
the reasons for the lower levels of penetration.

And more reforms will certainly make this growing sector appear more attractive for existing and
newer participants.

Further information

Sakate Khaitan
Partner at ALMT Legal
[email protected]
Tel: +44 (0) 20 7645 9192

China

China’s insurance market has been undergoing significant changes

over the past two decades.

The People’s Insurance Company of China (“PICC”) was the first insurance company
established in China. PICC was 100% government-owned and the only insurance service
provider during the period from 1949 to 1988. Other domestic Chinese insurers such as Ping An
Insurance Company (“Ping An”) and China Pacific Insurance Company (“CPIC”) were
subsequently established in 1988 and 1991 respectively. By the mid 1990s, PICC still had the
lion’s share of the Chinese insurance market amounting to 70% of premium income. PICC, Ping
An and CPIC are to date still the three largest insurers in China.

China allowed foreign investment in the insurance sector from 1992. American International
Group was the first foreign insurer approved to conduct insurance business in China. Tokio
Marine & Fire Insurance and Winterthur Swiss Insurance followed subsequently in 1994 and
1996 respectively. In order to protect domestic insurers, geographical limitations and other
restrictions were imposed on foreign-invested insurers.

Following China’s accession to the World Trade Organisation, these limitations / restrictions on
foreign-invested insurers in the form of corporate entry vehicles, geographical coverage and
business scope, have been gradually lifted. Latest statistics indicate that 43 foreign insurance
companies have set up 212 operational presence (including representative offices) in China.
Nipponkoa and HSBC Insurance were amongst the insurers who were recently granted
upgraded licences to operate as subsidiaries in China, thereby potentially allowing them to
access a larger share of the Chinese insurance market.

In the reinsurance market, major players like Munich Re, Swiss Re and Cologne Re have all
established their subsidiary companies in China. In mid 2007, Lloyd’s launched its own
subsidiary, Lloyd’s Reinsurance Company (China) Ltd based in Shanghai. In April 2008, German
reinsurer Hannover Re obtained their licence from the China Insurance Regulatory Commission
(“CIRC”) to establish a branch company in Shanghai and to carry out reinsurance business in
China.

12 www.clydeco.com
Marsh was the first foreign insurance broker to be granted a wholly foreign owned enterprise
licence in early 2007. The other large international brokers, including Aon and Willis, also have
presence in China.

According to data published by the CIRC, the total annual premium income for 2008 reached the
equivalent of RMB978.4 billion (approx €97 billion). Of this amount, roughly RMB733.8 billion
(approx €73 billion) was for life insurance and RMB244.6 billion (approx €24 billion) was for
non-life insurance respectively.

China’s insurance market continues to grow at rates that are unprecedented in other regions of
the world. According to CIRC, the total assets of the insurance sector reached RMB3.5 trillion
(approx €350 billion) by the end of March 2009, up 6% from the beginning of the year. In the
first quarter of 2009, insurance premium rose 10% from a year earlier, reaching RMB328 billion
(approx €33 billion). Property insurance premiums rose 12% and life insurance premiums rose
by 9.4%.

China adopts a civil law system and the common law doctrine of binding case precedent does
not apply. A judge presiding over a case will decide based on what the Chinese laws and
regulations say.

Chinese law does not impose any restriction on the choice of dispute resolution mechanism.
Parties to an insurance contract are free to decide whether to submit their disputes to either an
arbitral tribunal or a Chinese court. Specialised maritime courts are located in 10 coastal cities
in China for handling marine insurance cases.

On 28 February 2009, the Standing Committee of National People’s Congress approved

amendments to the Insurance Law which will come into effect on 1st October 2009. The new
Law has introduced significant changes in term of re-insurance, related party transaction,
solvency etc and there is a greater clarification and protection of the rights and interests of
policyholders and the insured.

Clyde & Co’s Hong Kong / Shanghai offices have extensive experience in dealing with corporate
and regulatory insurance as well as claims issues in the region. We service our local and
international clients in a wide range of legal issues including their investment in the Chinese
reinsurance / insurance market, liaising with regulatory authorities, policy wording compliance
review and dispute resolution.

Further information

Ik Wei Chong
Partner
[email protected]
Tel: +86 21 5877 5128

Carrie Yang
Associate
[email protected]
Tel: +86 21 5877 5128

Simon Baker
Partner
[email protected]
Tel: +852 2878 8600

www.clydeco.com 13
 Singapore

Singapore is one of the most competitive places for business

worldwide and is situated centrally among emerging markets in the
Asian region enjoying strong economic growth. Since Clyde & Co
opened its Singapore office in 1991, there has been a considerable
increase in the amount of insurance and reinsurance business
conducted in and through Singapore, which has become an
insurance and reinsurance hub for the region. One example of this
is the growth of the Lloyd’s Asia platform in Singapore, which in
2002 had two syndicates and now has fifteen syndicates and
continues to expand.
With a strong tradition of the rule of law based on the common law system, Singapore’s legal
system is widely regarded as open and fair. Singapore has grown to be a venue of choice for
international businesses in Asia seeking to resolve disputes in an open manner in a neutral third
country.

Arbitration in Singapore is based broadly on the UNCITRAL Model Law and the Singapore
International Arbitration Centre (SIAC) is an active institution. With Singapore being a party to
the New York Convention (on enforcement of arbitration awards), its arbitration awards are
enforceable in almost any country of the world. Additionally, the Permanent Court of Arbitration
and the International Centre for Dispute Resolution have opened in Singapore and a new
integrated dispute resolution complex has recently opened housing excellent facilities for ADR.

Singapore’s eminence as a regional marine transportation hub is well known. All elements
relating to this are insured, from the cargo, to the terminal operators, to the hulls and liability of
the vessels. Additionally, Singapore has a thriving shipyard industry which, as well as producing
ships, is now a world leader in the production and conversion of rigs and offshore equipment and
vessels such as FPSOs.

Singapore and the countries around it are very active in the development of their infrastructure.
All of these projects have to be insured both for their construction and operation. Many of these
insurances, although fronted in the country in which the project is located, are reinsured through
Singapore, often led by one or more of the large international reinsurers that has a base in
Singapore.

Increasing sophistication of businesses and regulators as well as the growth of service and
support sectors in the region, has led to the growth of other financial lines of insurance such as
PII and D&O.

Clyde & Co’s Singapore office has been involved in much of this development. By way of
illustration, lawyers in the Clyde & Co Singapore office have over recent years been involved in
substantial multi-jurisdictional insurance and reinsurance claims arising from SARS, the 2004
Tsunami; D&O insurance issues arising from the failure of various companies; liability claims
arising from land reclamation; bridge construction; power station construction and operation; oil
rig construction; project cargo losses; offshore oil & gas field development through substantial
pipeline installations, cable-laying projects and many more.

14 www.clydeco.com
The Beaumont & Son team at Clyde & Co Singapore has been involved in all the recent major
aircraft losses in Indonesia and Thailand as well as advising in relation to the delay of the A380.
The marine insurance team is handling many other large losses, including the car carrier
“Hyundai No. 105”, the largest loss in Singapore waters over recent years and defending a claim
against insurers brought following the total loss of a vessel in a typhoon off Taiwan. We are
currently advising on the insurance (and reinsurance) aspects of various projects in the region,
for example, advising an oil major on the interplay of rights and liabilities and insurances in
various contracts surrounding the construction of an LNG terminal; advising insurers of a
recovery action against the converters of a large LPG FSO, advising insurers of a power station
after a turbine failure, and advising political risk reinsurers following a high profile incident.

The high commodity prices have caused difficulties in the market for some. The office has acted
for insurers in unravelling the fall out following the failure of a major vessel charterer and is
involved in multi million dollar claims arising out of disputes between regional coal exporters and
their contractual counterparts.

Singapore continues to develop as a regional hub and we look forward to continuing to serve our
local, regional and global clients in the years ahead.

Further information

John Champion
Partner
[email protected]
Tel: +65 6544 6516

Chris Edwards
Partner
[email protected]
Tel: +65 6544 6506

Clyde & Co LLP offices and associated* offices: Abu Dhabi Bangalore* Belgrade* Caracas Doha Dubai Guildford Hong Kong
London Moscow Mumbai* Nantes New York Paris Piraeus Rio de Janeiro Riyadh* San Francisco Shanghai Singapore St Petersburg*

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www.clydeco.com