Lloyd's Of London

Lloyd's Of London

Summary of Lloyd's Of London

A major world insurance market, which arose to provide coverage of marine risks but which now insures against virtually any loss or calamity. Contrary to popular belief, Lloyd's is not an insurance company; it has no shareholders and assumes no liability for insurance contracts written by its members. Lloyd's is an association of underwriters, each of whom accepts risks for his own private account. Risks may be accepted at Lloyd's only by an under-writing member, of which there are more than nineteen thousand; underwriting members pledge their personal fortunes to respond for risks they have accepted, and they retain the premium income derived, less reinsurance and other expenses.

To protect underwriting members from catastrophe losses, members often form syndicates in which risks are assumed collectively. At present, there are more than four hundred syndicates operating at Lloyd's; some have only a few members while others may have more than a thousand. This pooling of resources also permits the members to hire professional underwriters to assume risks for the group.

With the exception of long-term life insurance and financial guarantees, virtually every form of insurance is written at Lloyd's.

The institution of Lloyd's rose around 1680, when merchants, ships, captains, and others involved in maritime enterprises congregated at the coffeehouse of Edward Lloyd to receive shipping news. There is no evidence to support the belief that Edward Lloyd himself ever wrote a contract of insurance.

As a response to excessive speculation in various offshore investment schemes on the part of the British propertied classes, culminating in the collapse of the South Sea Company, Parliament enacted a law (1729) limiting marine insurance to the Royal Exchange Assurance and the London Assurance Company. The act, however, did not prohibit private individuals from underwriting contracts of marine insurance. The passage of the 1729 act and the competition imposed by the Royal Exchange and London Assurance forced the loose federation of private underwriters to regularize their affairs into an ongoing society. In 1811 the underwriting members subscribed to a trust deed, which served as the legal basis of Lloyd's. In 1871, the association was chartered by act of Parliament.

The act of 1871 formed the Corporation of Lloyd's, the affairs of which are directed by the Committee of Lloyd's, comprising sixteen underwriting members. Except in a very few instances, thresources also permits the members to hire professional underwriters to assume risks for the group.

(Main Author: William J. Miller)


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