Lloyd's — A Shakespearean Tragedy
The London Market and Lloyd's
THE RHA REVIEW
Volume 10, No. 2, First Quarter 2004
By Michael D. Jackson
After the disaster of September 11, the insurance market feared for its future. Lloyd's had been in business for more than 300 years but was shaken to its very roots. But Lloyd's, as it has always done, has bounced back with a return to profit last year. Lloyd's does have a certain resilience. At times certain quotations just pop into one's mind, and perhaps what took place then and since can be covered by what Shakespeare had Hamlet say:
To be or not to be: that is the question,
whether tis nobler in the mind to suffer
the slings and arrows of outrageous fortune,
or to take arms against a sea of troubles.
Much of this quotation can be taken to refer to what has happened then and since, both in the insurance world and in the world as a whole. The market has suffered outrageously and has recovered. Lloyd's began its long and troubled passage through history in the late 1600s. It has seen many disasters, both man-made and natural. The world Trade Center disaster was the biggest ever suffered, at approximately £1.98 billion ($3.5 billion). Nick Prettejohn was quoted as saying, "We never envisaged such a horrific scenario coming to pass … it was a terrible, tragic example of how unpredictable and complex risk is in the world today."
But what is risk? My dictionary defines it as "possibility or likelihood of danger, injury, loss, etc.; hazard …." So without risk, then the insurance market would not be needed. So when disasters take place, the market must respond. London has in the past done all in its power to help. Back in 1906, when the earthquake hit San Francisco, Cuthbert Heath swept all hesitancy aside and paid all claims, developing the tremendous reputation that Lloyd's, from that moment on, attracted. The nightmares of the late 1980s and early 1990s, which emanated from pollution losses and asbestos claims, have tarnished that reputation. Fraud was alleged. This consumed the market with lawsuits and gossip, and disputes and gossip, and restructuring and gossip.
However, Shakespeare comes to the fore again with Henry V standing boldly and saying:
Once more unto the breach, dear friends.
The London market has stood firm and reformed and kept the world-renowned marketplace a major player in the industry.
Henry rallied his troops, who believed they were outnumbered by the opposition, with a speech, some of which I quote and believe is relevant to what is happening now:
That he which hath no stomach to this fight,
Let him depart; …
He that shall live this day, and see old age,
Will yearly on the vigil feast his neighbours …
But he'll remember, with advantages,
What feats he did that day.
Then shall our names,
Familiar in his mouth as household words – …
But we in it shall be remembered –
We few, we happy few, we band of brothers; …
Those that remain in the market after September 11, and continue in business, will look back at some point and realize what has been achieved against increasing competition and larger opposition.
Lloyd's has been around for three centuries, and, if the reforms that it is now subjecting itself to are successful, it should survive another three. These reforms include the amending of a very old tradition of three-year accounting and changing to annual auditing. Names with unlimited liability will become obsolete.
The breach has been filled, the market has had the stomach to fight, and those that continue will live to underwrite another day.
Shakespeare wrote much. Let us all hope that we have already had the tragedies and that comedies do not follow.