In 1688, Lloyd’s Insurance Market was founded in a coffee shop owned by Edward Lloyd. This coffee house was a haunt for those involved in maritime trade. Lloyd’s only dealt in marine insurance for many years. However, Lloyd’s began to grow a substantial non-marine business, especially business from overseas. This market is now one of the most important in the world.
This organization is unique in the entire world. The Council of Lloyd’s was established by the 1982 Lloyd’s Act. It is the governing body. Activities under its control are governed under Acts of Parliament. Although the intention is the same, the statutory regulations that are intended to preserve the solvency or integrity of Lloyd’s Underwriters are different from those that apply to insurance companies.
Lloyds, unlike many of its competitors in insurance and reinsurance, is not a corporation. The Lloyd’s Acts 1871-1982 created the Society of Lloyd’s. Different systems are used to issue policies, collect and account for premiums, as well as handle claims. Lloyd’s can only be placed by Lloyd’s brokers who are accredited. The Corporation owns the premises and provides all facilities necessary for transacting business within its territory. It also maintains the regulatory controls. The Corporation of Lloyd’s does not actually transact the actual business. It is done by Lloyd’s insurance brokers and underwriting members.
Underwriting members are considered individuals, and their liability is unlimited. It would be impossible for everyone who is underwriting member of Lloyd’s to transact business independently. Therefore, they are organized into syndicates under the control of the person responsible for the transaction. The person responsible for the transaction of the business on behalf of the members has full power of attorney. An underwriter who has power of attorney must have support. This is provided by his deputies. The rules and regulations must be followed by those who accept insurance.
Lloyd’s broker is another part of the market. He is subject to the same rules and regulations. Membership is not available to anyone without being accredited. Only Lloyd’s brokers can enter the Underwriting Room to transact business. The “Room”, as it is known, is where underwriters are seated at “boxes” and transact business. The Lloyd’s broker is usually a partnership or limited company. The broking member is typically the chief executive. Substitutes are the staff members of a company that have broking power. A second category is called’messengers’. They are permitted to send messages to the broker, but are not authorized to do any insurance broking.
The Lloyd’s broking offices include large companies, medium-sized businesses, and the very small. Many large and medium-sized companies employ specialists and run a variety of departments. Many small firms specialize in a particular business area and may have their own trade syndicates. One broking house may concentrate on professional indemnity, while others focus on reinsurance. Others might be focused on the hotel and catering industry, and so forth. However, some small businesses operate a general business.
Although transactions must be done in the Room, there are some exceptions. However, it would be impossible for Lloyd’s to transact motor business, especially for individual policyholders. Some motor insurance syndicates have gotten around this issue by allowing provincial insurance brokers to deal directly with them, but insisting that the premium be guaranteed by a Lloyd’s broker. These syndicates may have established offices in cities throughout the provinces, and local insurance brokers will deal directly with them. This allows syndicates to compete against local insurance companies.
