Bermuda-based Catlin Group Ltd. is dipping its toes into the Chinese insurance market as part of the Lloyd’s of London’s new reinsurance operation which opened in Shanghai on Monday.

Industry experts are predicting that China will become the biggest insurance market in the world — outside the US — by 2025, and Lloyd’s has long been keen to establish itself in the domestic market.

Although Lloyd’s has had a representative office in Shanghai for seven years, it has been restricted to providing offshore reinsurance capacity. Now it can do some local-currency business for the first time.

Catlin’s involvement is that Li Linmao, one of the company’s underwriting staff in London , has been seconded to the new entity, Lloyd’s Reinsurance Company (China) Ltd. (LRCCL).

Stephen Catlin, chief executive of Catlin Group Limited, said: “We are very proud to be one of the few Lloyd’s syndicates to establish operations in Shanghai concurrent with the opening of LRCCL. Our presence in Shanghai complements Catlin’s existing Asian offices in Hong Kong, Singapore and Kuala Lumpur and is part of Catlin’s strategy to work as closely as possible with local brokers and their clients.”

Catlin’s Syndicate 2003, the biggest on the Lloyd’s market in terms of premium capacity, will effectively function as part of LRCCL, underwriting some its reinsurance business.

Lloyd’s chairman Lord Levene said it had been a long time coming.

“For a long time it was a case of the irresistible force meeting the immovable object,” Lord Levene told UK newspaper The Daily Telegraph.

“Lloyd’s operates in a unique way and it is the result of a great deal of negotiations with the China Insurance Regulatory Commission [the industry regulator] and the politicians that we are here today.”

Direct foreign investment in China almost doubled between 1995 and 2005, its economic growth is twice the global average and the potential insurance market would appear to be huge.

But Lord Levene is reluctant to set formal targets for LRCCL.

“The simple answer is that we just don’t know how big this might become,” he said. “But if you are asking me to give you a flavour, then Asia accounts for about 10 percent of our business now and, if that doubles over the next 10 years, then a big chunk of that will be down to China.”

The Lloyd’s Shanghai office will adopt more modern — electronic — methods of doing business than its London base, where underwriters still use a predominantly paper-based system.