Lloyd’s Marks 100th Anniversary of 1911 Act

August 19, 2011

The Lloyd’s web site notes that August 18th was the 100th anniversary of the 1911 Lloyd’s Act, which was instrumental in transforming the market from a primarily marine insurer, to the specialized global risk market it has become.

In addition 1911 is also the year when Lloyd’s wrote the first ever aviation policy, following its first US Automobile Policy in 1907.

“This Act made the range of business Lloyd’s does today – from property to aviation, casualty to energy – possible,” said the bulletin. “1911 signaled a return to our roots in Edward Lloyd’s 17th century coffee house. The merchants who gathered there may have concentrated on marine, but they weren’t averse to covering other issues from fire insurance, death by gin drinking and even, it is reputed, female chastity [source: Peter L Bernstein’s Against the Gods: the remarkable story of risk].”

However, as the market moved “out of the coffee shop” to a more structured environment, it increasingly concentrated on marine coverage, becoming synonymous, over the next two centuries, with the shipping industry.

However, the onset of the industrial revolution changed the world, so Lloyd’s changed too. Cuthbert Heath, who’s become a legend – he famously directed Lloyd’s agents to “pay all claims,” following the San Francisco earthquake and fire in 1906 – was one of its greatest innovators. He was, “ironically,” as Lloyd’s points out, “the son of an admiral, yet he led Lloyd’s out of marine and on to land.

“Heath’s deafness prevented him from following in his father’s footsteps, but the Navy’s loss was Lloyd’s gain. He was a man of firsts. The first Lloyd’s man to underwrite jewelers’ block, smallpox and burglary, he also reinvented reinsurance for the whole market.”

The growth of Lloyd’s non-marine classes of business “grew exponentially; soon non-marine was on a par with marine at Lloyd’s in terms of premium volumes and now marine accounts for just 7 percent of the gross premium written by the market, according to Lloyd’s Annual Report 2010.”

As the market for insurance and reinsurance grew, so did Lloyd’s, particularly during the first half of the twentieth century. “In 1913 there were 631 underwriting members of Lloyd’s. By 1956 that number was 4,177. The rapid growth of the non-marine classes changed the shape of Lloyd’s. Prior to this, most underwriters wrote for their own account as sole traders. The largest of these ‘syndicates’ would be no more than five or six Names.”

As the non-marine market grew, many marine underwriters wantied to participate in other business, but, as marine specialists, they lacked the necessary underwriting expertise to do so. This need promoted the growth of larger syndicates, whose members had the knowledge and experience marine underwriters lacked.

Although the web site article doesn’t mention it, the biggest recent change for Lloyd’s came in 1994, when, following its near death from huge asbestos and environmental claims, corporate capital was admitted to back the syndicates for the first time.

Today there are around 80 syndicates operating at Lloyd’s. For the most part they are adjuncts of insurance companies, who write business both through Lloyd’s as well as other operating entities. Modern syndicates are well capitalized; the largest, Catlin’s Syndicate 2003, has a capacity in excess of $2.5 billion.

A breakdown of the various classes of business written through Lloyd’s is avaiable on the web site link posted above.

Source: Lloyd’s of London

Topics Excess Surplus Underwriting Lloyd's

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