Insurance policies to protect us all
December 21st, 2020
In Utmost Good Faith
In these challenging times, we are all looking for surety and stability and of course financial security.
The principle of an Insurance policy, be it for your car, your home, your business remains the same in that it can be relied upon to provide financial protection against unexpected events or negligence.
No matter whereabouts in the World you are reading this, chances are you are not too far away from an Insurance representative that can access the huge pool of underwriting talent and knowledge of Lloyd’s of London.
The Lloyd’s market has been at the forefront of its industry for more than 300 years, pioneering new forms of protection for a rapidly changing World.
From start-ups to small and medium-sized enterprises, national governments and multinational corporations, their customers are the people driving the global economy, and they rely on the specialism, strength and security of the Lloyd’s market to help them protect what matters most. The Lloyd’s market has helped customers around the World withstand shock, recover and rebuild, and they are proud to continue that essential service today.
Built for an interconnected economy, Lloyd’s insures people, businesses and communities in more than 200 countries and territories. As Lloyd’s works to develop the insurance industry in new and emerging markets, that number will continue to grow.
Contrary to popular belief Lloyd’s is not an Insurance company, rather, Lloyd’s is a corporate body governed by the Lloyd’s Act of 1871 and subsequent Acts of Parliament. It operates as a partially mutualised marketplace consisting of multiple financial backers, grouped in syndicates, convened to pool and spread risks. These underwriters, or “members,” include both corporations and private individuals, the latter of which is known as “names.” In its essence, Lloyd’s is a marketplace where buyers of insurance and sellers of insurance conduct business.
In February 1688, Edward Lloyd’s Coffee House in Tower Street London was referred to for the very first time in the London Gazette. The article declared a reward for five stolen watches and encouraged anyone with information to contact Lloyd at his shop in the City. They were believed to have been taken by a rather insalubrious gent with, Pockholes in his face, wearing an Old Brown Riding Coat, and a black Bever Hat’. It was an early sign of insurance, or at least reward. Nevertheless, what Lloyd’s coffee house specialised in was information about shipping. At this time, there were more than 80 coffee houses within the City of London’s walls; each one was a centre for entrepreneurs and merchants, and each had a specialist interest to offer. A driven man, Lloyd made sure he provided intelligence second to none.
Whilst marine insurance was the mainstay for the early years and centuries of Lloyd’s, the motorcar was invented in 1885, but when Lloyd’s was first asked to insure one in 1904, no guidelines existed, because the underwriters at Lloyd’s were used to dealing with marine policies, the insurance documents described the car as a “ship navigating on land.”
An insurance policy is only worth its premium when a claim is made. In 2019 Lloyds paid over 23 Billion in losses to its Insured clients. Let’s take a look back over the years at 2 of the most notable losses that Lloyds have settled.
Early in the morning of 18 April 1906, a massive earthquake (8.25 on the Richter scale) shook San Francisco and sparked uncontrollable fires that raged for three days, taking several thousand lives and leaving half of the population homeless. The burden of losses fell on the insurance industry and as one of Lloyd’s leading earthquake underwriters at the time, Cuthbert Heath faced an enormous bill. Heath famously instructed his San Franciscan agent to “pay all of their policyholders in full, irrespective of the terms of their policies.” The earthquake ended up costing Lloyd’s more than £40m (more than £792m in today’s currency), and the aftermath of the disaster laid the foundations for many of today’s modern risk modelling and building practices.
On 9 January 1912, Insurance broker Willis Faber & Co came to Lloyd’s to insure the Titanic and her sister ship, the Olympic, on behalf of the White Star Line. The Titanic was insured in the Lloyd’s market for £1m, which amounted to 20% of the total £5m capacity of the market at that time. It was the largest-ever marine risk, and later it would become the largest marine loss, because covering this “unsinkable” ship was considered such a prestigious risk, the policy was subscribed to by all marine underwriters at Lloyd’s and by most London marine insurance companies. On 14 April 1912, the Titanic collided with an iceberg during her maiden voyage and went down in the freezing waters of the North Atlantic in just two hours and 40 minutes. More than half of the ship’s passengers and crew died. Despite the high levels of claims arising from the tragedy (amounting to 20% of Lloyd’s premium income that year), Lloyd’s insurers paid out in full within 30 days.
We have of course seen the horrendous events of 9/11 at the World Trade Centre. However, that was also the year of Hurricanes Katrina, Andrew and Ike as well as the New Zealand Earthquake and the tsunami in Japan all of which resulted in Claims being paid around the world from Lloyd’s in London. In fact, Lloyds deployed 6.6 billion Yen of payments into Japan within 48 hours of being requested.
The value of your insurance premium can never be understated. It can mean the difference as to whether a business can survive and rebuild or fail with dire consequences to management, staff and reputation.
As we look forward into this technological era we now live in, a world away from a coffee shop in the backstreet of London, we are now faced with the hidden threats of Cyber Crime, Ransomware and hacking and of course pandemics all of which have the ability to bring a company to its knees. Lloyd’s continues to adapt every day to these new and far reaching threats we face and will hopefully for centuries to come provide Insurance policies in utmost good faith to protect us all.
A fascinating insight into the need for insurance coverage and the history of Lloyd’s of London. Nick Lawrence is the Assistant Vice President at Paragon International Insurance Brokers and has supported Briars and its clients in our endeavours to land & expand with peace of mind. Thanks Nick!