Church Insurance Representatives Visit Lloyd’s of London

The organisation for the (ACIB) renewal on 1 January each year commences in August, with a meeting with Lloyd’s syndicate underwriters in London.

MCNZ has been a member of the ACIB for over 20 years. Previously the ACIB Directors have travelled to London with David Leather, Concordia, the ACIB Underwriting Agent to participate in negotiations. On arrival in London in October this year, Wayne and I joined David Leather and Nigel Chick, Concordia’s Broker, from Anwins Broking, London. We co-presented the ACIB portfolio, our risk management strategies, claims and outlined the structures of both churches.

We had a busy daily schedule during our weeklong stay,  meeting with insurers from the Lloyd’s syndicates, at Anwins office. Nigel Chick arranged a visit to Lloyd’s, to view the syndicate underwriters, and brokers in action. The visit to this iconic London HQ was a highlight of our stay.

Lloyd’s in Three Centuries

The Lloyd’s market has been at the forefront of the insurance industry for more than 300 years, through major historical events, great tragedies and technological breakthroughs. This brief outline traces the moments that have shaped Lloyd’s.

Coffee was first imported to the UK in 1652, quickly becoming a fashionable drink of the elite and professional classes. After the 1666 Great Fire of London destroyed a large area of the City, and people began to rebuild, coffee shops emerged as places where people could transact business as trade and commerce began to develop again.

The first reference to Edward Lloyd’s Coffee house, was in the London Gazette, in February 1668; Lloyd’s Coffee House was popular with ship owners and captains returning from overseas voyages. When Lloyd began renting out “boxes” (tables) in his coffee shop, entrepreneurial businessmen took the opportunity to sell insurance to ship owners, in the event their ship did not return. Lloyd’s built a strong reputation for shipping news and became recognised as the place to obtain marine insurance. This was the establishment of the Lloyd’s syndicates, as we know them today.

The term “underwriter” was coined at Lloyd’s, originated by the practice of having each risk- taker write their name under the total amount of the risk they were willing to accept, at a specified premium.

Lloyd’s Coffee House published daily shipping news, informing people about departures and arrivals including slave voyages, the cargo aboard each ship, where other country’s fleets were operating and where pirates were known to be active. The first official edition of the Lloyd’s List was published in 1734. As one of the world’s oldest continuously running journals, the paper still provides weekly shipping news to London and the world through an online edition of the list.

Lloyd’s is a unique insurance and reinsurance market with an unrivalled concentration of specialist underwriting expertise. Much of the business written at Lloyd’s is still conducted face-to face in the world-famous Underwriting Room which welcomes more than 5,000 people, sees £100m in premiums come into the market and £82.1m paid out in claims every single day.

Underwriters still sit at their company boxes where Brokers place their clients’ risk with Lloyd’s underwriters to evaluate, price and accept the risks. Much of the capital available at Lloyd’s is provided on a subscription basis, where Lloyd’s underwriters join together as syndicates, and where syndicates join to underwrite risks. Collectively, Lloyd’s syndicates insure risks, which total more than £35bn in insurance premiums each year.

Lloyd’s is regarded as a world leading insurance and reinsurance platform. The market has covered Arctic explorers, international aid organisations, satellite launches and taken on major global risks including cyber, terrorism and the consequences of climate change. On a January morning in 1912, it insured the Titanic for 1m.

Insuring the Titanic

Broker Willis Faber and Co came to Lloyd’s on 9 January 1912 to insure the Titanic and her sister ship, the Olympic, on behalf of the White Star Line. Helped by the fact that the ships were universally advertised as “unsinkable” the policy was subscribed to by all marine underwrites at Lloyd’s and by most London marine insurance companies.

During her maiden voyage on 14 April 1912, the 46,000-ton titanic struck a submerged iceberg 350 miles off the coast of Newfoundland and went down in freezing waters of the North Atlantic.  When Lloyd’s opened for business on 15 April the market heard conflicting reports. On the news that the Titanic had struck an iceberg, reinsurance rates rose sharply and reached 60 percent after confirmation from a Lloyd’s coastal signal station that the vessel was sinking. Shortly after this, a reassuring message came for the Exchange Telegraph in New York confirming that the Titanic was safely undertow for Halifax. Rates plummeted to under 24 percent on the news, affecting an estimated £50,000 worth of reinsurance.

Reinsurance is the insurance of insurance. If an insurer takes on a particularly large risk, they can transfer part of it to another insurer.

Lloyd’s Today Steeped in History

The modern Lloyd’s was born when it moved to the Royal Exchange in 1774, leaving the coffee business. It was at this time that Lloyd’s Loss Book was introduced to record details of lost ships. Today’s loss book, displayed in the Lloyd’s Underwriting Room, is still updated using quill and ink.

Lloyd’s has occupied a number of buildings and its current headquarters on Lime Street is a London icon. Designed by British architect Lord Richard Rogers, and opened in 1986, the building is a radical addition to the skyline. All the building’s services – staircases, lifts, lobbies, toilets, water pipes – are on the outside of the building making them easily accessible for repairs. The interior is dominated by a spectacular central atrium.

When we visited Lloyd’s the Underwriting Room was bustling, with negotiations taking place at underwriters’ boxes. We were shown the Lutine Bell, which still hangs in the market today. The purpose of the bell was to inform the market when the ship arrived safely at port, or to confirm it was lost. At Lloyd’ the bell is struck to mark significant occasions of ceremony and mourning.

Excerpts for this article have been taken from the Lloyd’s pocket guide.