Steve Badger and I will have a friendly debate and presentation at Lloyd’s Property Insurance Claims Group Conference on May 11th. Our topic will be The three sides of every CAT claim – Insurance lawyer, Policyholder’s lawyer and THE TRUTH. Lloyd’s is very important for the international property insurance market. I feel honored to speak in front of this professional audience at a long sold out event.
This is not the first time Steve Badger and I have presented on property insurance topics. Although the nature of our customer representation shapes our opinions, I think many people find it surprising how much we agree on certain issues. We also have the ability to set each other̵7;s policyholders against the insurer’s views in a way that is not offensive to the public. Respectful and honest discussion is important to learn about the difficult issues of claim, which are often ambiguous when it comes to solution.
Most Americans think of Lloyd’s as an insurance company. This is not correct. I discussed the legal significance of this 11 years ago in lawsuits against “Lloyd’s of London” are often incorrectly “named”. Lloyd’s is an insurance market with significant administrative services and business management for those involved in operating the international insurance market.
Wikipedia describes Lloyd’s as follows:
Lloyd’s of London, commonly known as Lloyd’s, is an insurance and reinsurance market located in London … Unlike most of its competitors … it is not an insurance company; rather, Lloyd’s is a corporate body governed by Lloyd’s Act 1871 and subsequent laws in Parliament. It functions as a partially mutual marketplace within which several financial financiers, grouped in syndicates, gather to merge and spread risks. These insurers, or “members”, are a collection of both companies and individuals, the latter being traditionally known as “names”.
The business taken out with Lloyd’s is predominantly general insurance and reinsurance, although a small number of syndicates take out life insurance. The market has its roots in marine insurance and was founded by Edward Lloyd at his cafe on Tower Street in approx. 1686. Today it has a dedicated building on Lime Street where business is conducted at each syndicate’s “box” in the insurance company “Room”, where the insurance documentation is traditionally known as a “slip”.
The market’s motto is FidentiaLatin for “trust”, and it is closely related to the Latin phrase uberrima fidesor “extreme good faith”, which represents the relationship between insurer and broker.
On its informative website, Lloyd’s says:
Business at Lloyd’s is still conducted face to face, and the lively issue guarantee space is central for the market to function smoothly.
The majority of the transactions written at Lloyd’s take place through brokers who facilitate the risk transfer process between customers (policyholders) and insurers.
Customers can discuss their risk needs with a broker, a coverholder or a service company. Specialists for each syndicate price guarantee and handle any subsequent claims in relation to the risk.
The market structure encourages innovation, speed and better value, which makes it attractive to both policyholders and participants. Immediate access to decision-makers means that answers to whether a risk can be placed are given quickly, which means that the broker can provide fast and affordable solutions.
The Lloyd’s market houses syndicates that offer an unmatched concentration of specialist expertise and talent in issue guarantees.
An article from Tulane Law Review, Not your average coffee shop: Lloyd’s of London – A twenty-first century about the history, structure and future of marine insurance backbonealso noted the history of Lloyd’s:
One of the most important local objects in the trade in this enterprising county and in fact in the world itself, is Lloyd’s Coffee House, a name that comes from the first person who kept it, and who had no idea that it would gradually get a celebrity of the same size in the annals of the commercial world, like any sovereign in the history of the courts.
For 17th-century Londoners, the simple coffee house represented “the center of social life.” It was a place where citizens could escape from the puritanical and austere aspects of 1650s English society, and within a short time the coffee shop phenomenon had “taken hold in London”. Consequently, during this arduous period of the British Empire, huge amounts of commercial transactions began to take place within their modest borders, with business literally taking place around the coffee table. On the list of official cafes for the year 1687 appeared an Edward Lloyd, who decided to open his cafe near St. Catherine’s Landing on Tower Street near the Thames in central London. “Undoubtedly, Lloyd’s early clientele must have largely consisted of seafarers, including captains and ‘shipmen’ who met there to carry out their day-to-day business.” In addition, the early Lloyd’s coffeehouse served as an auction house for the sale of shipping vessels. ‘ Eventually, due to the constant association of this distinct class of businessmen and their trade in the café, Lloyd’s coffeehouse began to develop a growing reputation as a maritime commercial meeting place.
In 1710, Lloyd’s was considered London’s “highest commercial venue” and by Edward Lloyd’s death in 1713, “his establishment can certainly be described as the recognized headquarters for maritime affairs.” However, there is no evidence that any significant amount of marine insurance guarantees occurred with Lloyd’s during this period. In fact, DEW Gibb, a prominent member of Lloyd’s, notes that “we have no idea about the date on which its permanent employment, its predetermined business in marine insurance, started.” What can be deduced from historical stories is that during the late 17th and early nineteenth centuries, groups of retired ship captains began to hang out at Lloyd’s and expand their expertise into the thriving area of marine insurance … Although many of these traders took out their own risks (or the risks of their friends sitting across the table), they were undoubtedly the early prototype of the modern marine insurance guarantee, sans syndicate.
During Lloyd’s dramatic rise in vegetation, the volume of marine insurance gradually began to increase throughout the UK. So did insurers, brokers and insurance companies who tried to get part of the document. Although there were other facilities that housed marine insurers, Lloyd’s specifically offered “the best available news service on the world’s shipping, messages from the Admiralty and from every British port, gossip from return ship skippers
. . . .
and reports of losses the moment they first reached London. ‘ Consequently, it is understandable that many insurers, and now brokers, began to be drawn to Lloyd’s during this period to conduct their marine insurance business.
From a speech, Origins of London Marine Insurance, by Professor Adrian Leonard, which I have linked below as today’s video, gives Professor Leonard a story about London’s marine insurance. He said in part:
It strikes me now that I’ve been pretty quick about the story of Lloyd’s. It has to start with Edward Lloyd himself, who seems to have been a pretty energetic entrepreneur. Not much is known about him, to be honest, given that he was so productive. We know that he ran a coffee house on Great Tower Street at least at the end of 1688, or 1689 according to modern dating. In 1692 he had, to appeal to his customers involved in trade, launched the first version of his eponymous list, with the somewhat awkward title Ships Arrived at, and Departed from several ports in England, which I have accounted for in London , with a subsection called An Account of what English Shipping, and Foreign Ships for England, I hear about in foreign ports. The earliest preserved copy of the publication discovered so far is number 257, dated December 22, 1696.
As I approach the May 11 conference in London, I will write more about Lloyd’s and the important role that those who work and manage Lloyd’s play in the US real estate insurance market.
I do not think Lloyd’s of London would insure this mouth.
—Kathie Lee Gifford