Lloyds of London, the venerable old-line British insurance house, has made a record profit of pound stg. 3.7 billion ($9 billion) last year but cautioned that 2007 might be less favourable and warned the market against reckless underwriting.
This is fascinating reading, considering the humble beginnings of this insurance industry and its conservative roots .
Lloyd's is not an insurance company. It is an insurance market of members. Lloyd's of London started at Edward Lloyd's coffeehouse around 1688.
It was a time when London was the busiest sea-port and the capital of the British Empire. Sea travel was dangerous and merchant ships filled with rich cargo, found themselves the victim of pirate attacks in addition to the natural perils of the sea.
All this made life very difficult for the merchants whose livelihood depended on their ships returning safely with their cargo intact.
Some businessmen including Edward Lloyd , sensing an opportunity, began to make deals whereby they promised to reimburse to the merchants the value of the cargo if it did not arrive at port in a fit state for sale.
In return for this insurance they demanded a premium. The value of the premium varied with the value of the cargo and, more importantly, with the risk being undertaken.
Each morning Lloyd used to send his waiters down to the dockside to bring news of the new ships that had arrived that night and he used to post this information on the walls of his establishment. This became known as Lloyd’s List and was soon being published as a daily newspaper of that name.
What began from a coffee house in London, gained legal footing when it became regulated by an Act of Parliament in 1871.
Since then Lloyd's has risen to become the world's most famous institution of insurance underwriting, a national symbol of prestige and a popular landmark attracting schoolchildren, tourists and architecture students.