Lloyd's of London: A Legacy of Growth and Challenges

1. 2002 CARE Seminar, June 2-4 Coffeehouses to Catastrophe Lloyd’s of London A Brief History

3. Century One - Origins • Medieval Times - “Voyage Accounting” = assets and liabilities of a voyage were not determined until the ship returned safely to home port. A ship traveling around the world could take 2.5 - 3 years. • 1690 - Edward Lloyd opens his coffeehouse attracting shipowners and Captains trading overseas, and merchants dabbling in marine insurance. • 1696 - Lloyd’s News; 1934 Lloyds List. • 1713 - Edward Lloyd dies. • 1721 - Bubble Act - Insurer’s given exclusive rights to the trade.

5. Century Two - Formal Marketplace • 1769 - Move to Coffeehouse on Pope’s Head Alley. • 1774 - Move to Royal Exchange = Lead by John Julius Angerstein (Father of Lloyd’s) ,79 Underwriters establish a formal marketplace. • 1780 - Seven Year War brings about 1st Big Loss. • Early 1800’s - Napoleon Wars bring about profits & expansion. • 1811 - Trust Deed - 1st Formal Constitution. • 1838 - Fire = Move to Jerusalem Coffeehouse, then London Tavern, then back to rebuilt Royal Exchange 6 years later.

6. Century Two - Formal Marketplace • 1851 - Committee passes bye-law to expel any member becoming bankrupt. • 1855 - Gibson request committee to accept responsibility for a bankrupt member’s outstanding claims. • 1856 - New members required to show security by posting a bond. • 1870 - Forwood’s inside information regarding the Venezuelan's “Mid-Ocean Horror” = leads to procedures for discernable conduct. • Act of 1871 = Lloyd’s becomes a Legal Entity.

8. Century Three - Uberrima Fides • 1870’s - Worldwide expansion = “Report Me to Lloyd’s” • 1880 - Cuthbert Eden Heath = “Why Not?” • 1906 - San Francisco earthquake. • 1908 - Annual Statement requirement = self-regulation preserved. • 1920’s - Harrison Scandal = “Collectively we are Lloyd’s”. • 1928 - Move to Leadenhall Street building.

9. Century Three - Uberrima Fides • 1958 - Move to 1st Lime Street building. • 1965 - Hurricane Betsy = 1st time in 20th Century Lloyd’s recorded a loss, -13% below New Premiums. • 1969 - Cromer Investigation = “Conflict of Interest” ignored.

11. Century Four - Changing Landscape • Rapid Expansion in the number of Names. • 6,001 in 1970 • 18,552 in 1980 • 32,433 in 1988 • New Breed of Names = Women, Foreigners, Middle Class. • 1986 - Move into new Headquarters on Lime Street • The building’s architect was told that the new building must be able to cope with the market tripling in numbers and capacity over the next half century.

13. Century Four - Dishonesty • 1974 - Savonita Affair • 1970’s - Sasse Affair. • 1982 - Christopher Moran. • Early 1980’s • Howden’s Gang of Four. • PCW’s “Baby Syndicates”. • Chairman Sir Peter Green - Christopher Moran’s revenge.

14. Century Four - Disaster • Asbestos & Pollution. • Annual Ventures & Reinsurance to Close. • Early 1980’s - Outwaithe’s Run Off Policies. • E&O Requirements. • Other Disasters. • Piper Alpha Oil Rig and Exxon Valdez. • Hurricane Hugo, Hurricane Gilbert, Typhoon Mireille, Britain's Gales, Australian Earthquake.

15. Conclusion - Patterns in History • One recurring feature of Lloyd’s history was that the buildings never quite kept pace with the expansion of business. • “The History of Lloyds is a history of continuous growth and change; but no step forward was ever made until its necessity had been proved by some crisis.”