Shares of Bermuda-based reinsurer Maiden Holdings plummeted The company also continued its ongoing restructuring by striking a loss portfolio transfer deal with fellow Bermuda-based company Enstar Group.
The coffee house soon became recognised as an ideal place for obtaining marine insurance.
The shop was also frequented by mariners involved in the slave trade. Historian Eric Williams notes: This arrangement carried on untillong after the death of Edward Lloyd inwhen the participating members of the insurance arrangement formed a committee and underwriter John Julius Angerstein acquired two rooms at the Royal Exchange in Cornhill for "The Society of Lloyd's".
It was rebuilt bybut many of Lloyd's early records were lost in the blaze. Inthe first Lloyd's Act was passed in Parliament which gave the business a sound legal footing.
Around that time, it was unusual for a Lloyd's syndicate to have more than five or six backers; this lack of underwriting capacity meant Lloyd's was losing many of the larger risks to rival insurance companies.
A marine underwriter named Frederick Marten is credited for first identifying this issue and creating the first "large syndicate", initially of 12 capacity providers.
By the s Marten's syndicate had outgrown many of the major insurance companies outside Lloyd's. San Francisco earthquake and Cuthbert Heath[ edit ] On 18 April a major earthquake and resulting fires destroyed over 80 per cent of the city of San Francisco.
This event was to have a profound influence on building practices, risk modelling and the insurance industry. The San Francisco earthquake caused substantial losses for Lloyd's underwriters Lloyd's losses from the earthquake and fires were substantial, even though the writing of insurance business overseas was viewed with some wariness at the time.
While some insurance companies were denying claims for fire damage under their earthquake policies or vice versa, one of Lloyd's leading underwriters, Cuthbert Heath, famously instructed his San Francisco agent to "pay all of our policy-holders in full, irrespective of the terms of their policies".
The prompt and full payment of all claims helped to cement Lloyd's reputation for reliable claim payments and as an important trading partner for US brokers and policyholders.
It was estimated that around 90 per cent of the damage to the city was caused by the resultant fires, and as such since fire following earthquake has generally been a specified insured peril under most policies.
Heath is also credited for introducing the now widely-used "excess of loss" reinsurance protection for insurers following the San Francisco disaster. Within a year he was underwriting for himself on a three-man syndicate, and in he also opened a brokerage business.
In he wrote the first fire reinsurance contract, reinsuring the Hand in Hand insurance company and marking the start of Heath's push to diversify the market into "non-marine" business.
He also wrote Lloyd's first burglary insurance policy, its first "all risks" jewellery policy and he invented "jewellers' block" cover.
Later, during World War I he offered air-raid insurance protecting against the risk of German strategic bombing. The catastrophe halted the capital that hitherto had been pouring into Lloyd's, and twice as many members left between and as had left over the prior eight years.
Lloyd's response was to commission a secret internal inquiry inheaded by Lord Cromera former Governor of the Bank of England. This report advocated the widening of membership to non-market participants, including non-British subjects and then women, and the reduction of the onerous capitalisation requirements thus creating a minor investor known as a "mini-Name".
The report also drew attention to the danger of conflicts of interest. The liability of the individual Names was unlimited, and thus all their personal wealth and assets were at risk.
Changes in the financial markets[ edit ] During the s, a number of issues arose which were to have significant influence on the course of the Society. The first was the tax structure in the UK: Lloyd's income counted as earned income, even for Names who did not work at Lloyd's, and this heavily influenced the direction of underwriting: The investment gain was typically achieved by " bond washing" or "gilt stripping": Syndicate funds were also moved offshore which later created problems through fraud and self-dealing.
Because Lloyd's was a tax shelter as well as an insurance market, the second issue affecting it was an increase in its external membership: Third, during the decade a number of scandals had come to light, including the collapse of F. Sasse scandal and other issues[ edit ] The closure of the Sasse syndicate came after it wrote a "binding authority" in that delegated underwriting authority to Florida-based expatriate Dennis Harrison to write property and fire risks through his Den-Har Underwriters agency, even though Den-Har was not an approved Lloyd's coverholder a fact noticed neither by Sasse nor Lloyd's Non-Marine Association.
Den-Har had suspected Mafia links and the risks written were rigged: Once the three-year Lloyd's accounting period passed, the Names on syndicate were told they faced substantial losses, from mostly fraudulent claims.
The Names took legal action and were partially successful: Second, by the end of the decade, almost all of the market agreements, such as the Joint Hull Agreement, which were effectively cartels mandating minimum terms, had been abandoned under pressure of competition.
Third, new specialised policies had arisen which had the effect of concentrating risk: The recommendations of his report addressed the "democratic deficit" and the lack of regulatory muscle.
The Lloyd's Act of further redefined the structure of the business and was designed to give external Names, introduced in response to the Cromer report, a say in the running of the business through a new governing Council.
Immediately after the passing of the Act, evidence came to light and internal disciplinary proceedings were commenced against a number of individual underwriters who had allegedly siphoned sums from their businesses to their own accounts. These individuals included a deputy chairman of Lloyd's and one of its leading underwriters, Ian Posgate later acquitted.
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