A Brief History of Insurance:
Part Eight: The emergence of Lloyd’s as the worlds major insurance organisation:
In the previous article in this series we learnt about the humble beginnings of Lloyd’s as a relatively small coffee shop on Tower street. Whether it was an incredible piece of foresight or simple luck Lloyd developed a very specific clientèle of sailors, ship owners and merchants for boat insurance and marine cargo insurance risks.
Lloyds wasn’t the only coffee shop to do insurance business but it set the standards. In 1748 nearly one hundred houses including the famous coffef houses of Jonathan’s, Garraways and others were destroyed by a fire that ravaged Cornhill and in which scores of people perished and damage to the exent of £200,000 (nearly 200million in todays money) was caused. This event and another in the Cornhill when it was again destroyed by fire in 1765, left Lloyds in a prominent trading position.
It is evident however, that Lloyd cultivated this customer base by providing reliable and regular updates on the shipping news to those that visited his coffee house and soon Lloyd’s had established itself as a focal point within the very heart of the Shipping industry.
It was therefore inevitable that the coffee shop also quickly became a second home to a number of early insurers seeking to business with the Lloyd’s clientèle. Similarly it soon became accepted that if you were a merchant seeking insurance, then Lloyd’s was always a recommended first port of call. In fact within just three years Lloyd’s had grown to a level of importance and popularity that a new location was required and Lloyd moved his coffee shop to Lombard St – where it would remain for the next 83, years long after Lloyd himself had passed away.
As Britain established itself as a leading economic power through the exploitation of the slave trade, the shipping industry was at the heart of this economic boom. As slave trading was a high risk trade (1053 slave vessels are recorded as having been lost between 1689 and 1807) the insurers of Lloyd’s also found themselves in high demand.
Lloyd himself died in 1713 however his legacy remained strong.
In 1774 when the participating members of the insurance arrangement formed a committee and moved to the Royal Exchange in London, they became The Society of Lloyd’s. The Society’s objectives included the promotion of its members’ interests and the collection and dissemination of information amongst members helping them to further dominate the marine insurance industry which indeed they had created.
The first Lloyd’s act was passed in parliament in 1871 and it was this act that gave the Society a firm footing both commercially and legally and it continued to remain at the heart of the insurance industry, growing in tandem with the industry to eventually become one of the most powerful and well respected organisations in the world today.
In fact in many ways very little of Lloyd’s of London then changed for almost a century and this is even true of their motor insurance risks department. The membership of the society, which was made up in the main of market participants, became the market specialists. Lloyd’s continued to grow, and it’s members continued to flourish, mostly due to the force of economics. Insurance moved from being desirable to essential across just a few centuries. If you were in shipping you needed marine insurance. If you needed marine insurance you got it from Lloyd’s. It was as simple as that.
However, eventually the bubble had to burst. Just under a hundred years after the first Lloyd’s Act had been passed, the membership of Lloyd’s was realised to be too small for the risks that it was underwriting. The Cromer report commissioned in 1968 advocated opening membership options to both non-market participants and crucially to non-British subjects for the first time.
The insurance industry had become a global industry and Lloyd’s had to adapt to survive. In the next article in this series we shall explore the rise of insurance in the US and how they too had to adapt to the globalisation of the industry within the twentieth century.