An event significant to everyone who engages in the business of insurance directly as a purveyor or indirectly as a consumer recently took place as the hallowed Lloyd’s of London marked its 325th year as a leader in the international insurance marketplace. Prior to the corporate formation of Lloyd’s, many persons and many schemes were discussed and utilized as a means of lowering the high risk involved in shipping goods out into the market for distribution and consumption.
A manufacturer, as an example, could lose his life’s work—the production of the items he had for sale. A textile manufacturer could lose his entire fortune if the fabric became damaged, shrunk or faded during its trip to the distribution destination. Foods spoiled for lack of refrigeration and animals for butchering were targets for hungry and greedy pirates. Other exposures were dreaded, for it meant loss of cargo and ship. Weather, war or insincere or larcenous people could pilfer, rob and destroy the ships and cargo.
Banking had no answers, and even a strong navy couldn’t be everywhere at once, so the schemes of sharing risk became primary to merchants and shippers. Slowly the idea of hedging the risk became popular. Underwriters would announce their idea of taking on portions of the risk in consideration of a premium to be charged. The underwriters weighed the premium to be charged against the safety record of the ship’s captain and owners, age, size and structure. The safer the risk, the lower the premium.
Such plans had problems finding enough people to make up a list of participants in time for the sailing. Next was the problem of collection and safekeeping of the funds and the distribution after a disaster.
The popular coffee houses were part of the answer. Many people frequented them. The consumers became aware of other ship captains and owners and the safety records were made known, for it was good for their shipping business.
Edward Lloyd catered to these people. He located his coffee house conveniently on the wharves, offered a cozy, friendly environment, and furnished ship and shipping information plus paper and pen as a convenience. Earning acquaintanceship with many and showing an understanding of what needed to be done made Lloyd’s the hands-down favorite as the headquarters for the new corporate organization to be known as Lloyd’s of London.
Another Milestone for a Grand Organization
Thursday, March 27, 2014, marked the celebration of the 325th anniversary of the Lloyd’s of London insurance market—founded in a 17th century London coffee house frequented by merchants and ship captains seeking to spread marine and cargo risks. It is incredible to think that such a respected and historical—yet modern—institution as Lloyd’s began more than 300 years ago.
The western world at that time squabbled over exploration, expansion and an increase in global influence. European nations were at each other’s throats, declaring war on a regular basis. King Louis XIV sat on the French throne, while William and Mary were crowned monarchs of Britain. Lines on maps were continuously being drawn and redrawn, making the safety of trade and shipping routes all the more important and precarious. These were the seedlings of what we now know as the modern insurance industry. The monetary distribution of risk of loss of life and property—Lloyd’s was at the beginning.
Throughout its tenure, the Lloyd’s market has been housed in various locations throughout downtown London, expanding with the industry. The market is currently headquartered in a revolutionary contemporary building completed in 1986 at One Lime Street. It was at this location that Queen Elizabeth II inaugurated the Richard Rogers-designed structure and has since returned to lead in the anniversary celebrations of the esteemed organization.
The queen and her husband, the Duke of Edinburgh, arrived at Lloyd’s by limousine to much fanfare. A regal red carpet covered the front steps and the streets were lined with locals and tourists lucky enough to catch a glimpse of the royal couple as they made their way through a guided tour of the building and its many historically significant objects. Inside the great underwriting room and atrium, thousands of Lloyd’s brokers and underwriters looked on as the queen and Lloyd’s Chairman John Nelson made rousing presentations to the members of the market. The pomp and circumstance was truly fitting an entity of such history and service.
Thank you to Joe Russo, editor of the weekly newsletter “The Communicator,” for allowing us to insert his excellent article on the queen’s visit to celebrate the 325th birthday of Lloyd’s. Russo is a history major (UCLA).
Broker World enthusiastically agreed to let us take a timeout from Disability Insurance Insights to bring to readers this delightful story. Next month, back to basics.
W. Harold Petersen, RHU, DFP
RHU, DFP, is founder and chairperson of Petersen International Underwriters. He is recognized as an expert in underwriting development and policy innovation for such products as high-limit disability insurance, residual disability benefits, cash-value DI, and the expanding field of disability financial planning. The life/disability industry has acknowledged his leadership as an author, educator, motivator and leader, and has bestowed upon him the Harold R. Gordon Memorial Award (NAHU), the Will G. Farrell Award (NAIFA Los Angeles), the Lifetime Achievement Award (IDIS) and the Distinguished Service Award (NAIFA CA). His extensive industry involvement includes NAIFA, LIMRA, NAHU and The American College, all on local, state and national levels as well as IDIS. Petersen can be reached at Petersen International Underwriters, 23929 Valencia Boulevard, Valencia, CA 91355. Telephone: 800-345-8816. Email: firstname.lastname@example.org.