The early years of Lloyds
The rise of Lloyds occurred in February 1688. The London Gazette referred to Edward Lloyd’s Coffee House in Tower Street, London. Lloyd had offered a reward for the return of a stolen horse. The ten year old chestnut mare was described as having a white stripe down the nose and white hind feet.
The coffee house was a popular place for sailors, merchants and shipowners. He had the latest reliable shipping news available. He insured slaves and slave ships. Very soon Lloyds had a monopoly on maritime insurance related to the slave trade. It was maintained up through the early 19th century.
He later moved to the very centre of the financial district in London at 16 Lombard Street. The American Revolution of the 1770s, followed by the Napoleonic Wars in the early 1800s would soon demonstrate just how vital marine insurance could be. It would bring large profits to those who could provide it, but also huge losses. Lloyds now dominated shipping insurance on a global scale.
Society of Lloyds
In 1774 long after Lloyd’s death in 1713, the participating members of the insurance arrangement formed a committee and moved to the Royal Exchange on Cornhill as the Society of Lloyds.
The first edition of Lloyd’s list, is one of the world’s oldest continuously running journals. It was first published by Thomas Jemson in 1734. More than 300 years on and the paper still provides weekly shipping news to London and beyond.
Setting a precedent
In 1764 one of the most important trials in insurance law history was witnessed. It concerned the voyage of the French-built Mills Frigate. This vessel was insured by Lloyds. The frigate’s condition was weak, leaky and distressed. A court ruled after a lengthy court case that a ship must be seaworthy when leaving shore. Also that insurance could not even be paid on a ship which suffered a latent defect unknown to both parties. This therefore became part of the general English law of marine insurance.
When the Seven Years’ War came to an end, marine premiums returned to a lower level. Certain underwriters speculated, putting their names to other kinds of risks. These included highway robbery and death by gin drinking. The coffee house soon became notorious as a gambling den.
In 1769, a breakaway group of professional underwriters wanted to disassociate themselves from Lloyd’s alarming reputation. These underwriters established a new coffee house at 5 Pope’s Head Alley, London. The so-called “Old Lloyds” therefore ceased to exist. In its wake came the rise of Lloyds, whose professionalism and ordered existence entirely quashed the anarchy of the Lombard Street gamblers.
In the late 1980s to mid 1990s Lloyds went through a traumatic period. Large legal awards in U. S. Courts for punitive damages led to large claims by insureds. The claims were mainly on asbestos. pollution and health hazard policies. Some of the policies dated back to the 1940s.
A worker at an industrial plant may have been exposed to asbestos in the 1960s. He becomes ill 20 years later. In many instances the insurer did not understand the full nature of the future risk. The insurer therefore did not properly reserve for such claims. This resulted in the bankruptcy of thousands of individual investors.
After this dark period, the insurance world would again see the rise of Lloyds.