Inside Lloyd’s: Demystifying the inner workings of the world’s most famous insurance market

BY SHAWN MOYNIHAN, CATERINA PONTORIERO Photo: Ben Pipe

This past July, National Underwriter Property & Casualty‘sEditor-in-Chief Shawn Moynihan and Associate Online Features Editor Caterina Pontoriero traveled to the storied Lloyd’s of London for an exclusive tour of the market’s building and inner workings.

We went with one simple goal: To give insurance professionals an inside look at what Lloyd’s of London really is and what it does.

On our trip, NU P&C took exclusive photos and videos from inside the stunning Lloyd’s building (pictured above at night), as well as an interview with Lloyd’s Chairman John Nelson. We also sat down with representatives from Lloyd’s syndicate Barbican Insurance Group and Aon Benfield to discuss the advantages of working in the Lloyd’s market and learn how a reinsurance risk is placed.

What is Lloyd’s of London?

An important distinction to make about Lloyd’s of London is that it is not an insurance company; it is an insurance market.

Its syndicates (market-member insurance carriers underwriting coverage under the watch of managing agents) tackle some of the world’s most specialized risks, offering a wide spectrum of solutions.

Lloyd’s offers diversity in terms of specialty when assessing nontraditional risks. While many often invoke it in conversation as “the place where Mariah Carey had her legs insured,” the truth is, the majority of risks insured at Lloyd’s are far more vital to national economies, even if often a bit less glamorous.

A global hub for specialist insurance and reinsurance, Lloyd’s enables U.S. brokers to access underwriting talent and insurance coverage for a variety of Property & Casualty classes.

Intersection of past and present

Lloyd’s started more than 300 years ago in Edward Lloyd’s Coffee House on Tower Street, where it built a reputation as having the best intelligence on shipping. By the early 1700s, it became the go-to place for Marine insurance. More than three centuries later, a visit to its London office at 1 Lime St. finds this global specialist insurance and reinsurance hub abuzz with activity as brokers and underwriters negotiate coverage.

Natural light streams in from all directions from its towering central atrium, where criss-crossing escalators carry some of the world’s top insurance talent from one floor to the next. On its main underwriting floor opposite the Lutine Bell rests Lloyd’s fabled Loss Book, in which major losses are still recorded as they have been for centuries — with a feather quill pen.

Insurance requests from the United States come to Lloyd’s through brokers, managing general agents, coverholders (firms that are given delegated authority by Lloyd’s underwriters to write business on a discretionary basis) and other intermediaries. Lloyd’s underwriters insure nearly every class of business in the U.S., with the exception of Workers’ Compensation, Life and financial guarantees; its underwriters are authorized surplus lines insurers in all 50 states.

More than 40 percent of Lloyd’s global premiums are held by U.S. customers, primarily surplus lines insurance (including Marine, Energy and Aviation) and reinsurance. In 2015, the market’s gross written premiums topped £26.7 billion (about $34.6 billion). U.S.-dollar-denominated business accounts for the largest share of business at Lloyd’s.

Face-to-face risk negotiation

The majority of business written at Lloyd’s is placed through brokers, who expedite the transfer of risk between policyholders and underwriters.

A great deal of the coverage placed at Lloyd’s is negotiated face-to-face in the underwriting room. Each syndicate has its own “box” where business is transacted between brokers and the syndicate’s underwriters.

Brokers also may access the Lloyd’s market through coverholders or service companies.

Global reach

While the Lloyd’s building is in London, its reach extends far beyond the United Kingdom. Its international market provides insurance to more than 200 countries and territories.

Its insurance licenses in more than 75 jurisdictions, bolstered by a network of local offices and coverholders across the globe, allow access to insurance markets of any size.

Architectural wonder

Designed by British architect Richard Rogers, the Lloyd’s building took eight years to build and used 33,510 cubic meters of concrete, 30,000 square meters of stainless steel cladding and 12,000 meters of glass. Its space-age facade towers above many of its City of London neighbors in this densely built-up section of town.

Although paid tours of Lloyd’s are conducted, they are restricted to insurance business-related groups and to university or business school students. A dress-code tip for those lucky enough to schedule a visit: It’s strictly suits or jackets, trousers and ties for men, and smart business style for women.

Two for good luck

Lloyd’s is home to the Lutine Bell, which was recovered from the sunken British frigate HMS Lutine. The bell is rung only to mark events of great significance, with one stroke to signify bad news (for example, on 9/11) and two strokes to mark a positive event (for instance, when Queen Elizabeth II her husband, Prince Philip, visited the market in March 2014 to unveil a plaque commemorating Lloyd’s 325th anniversary).

Saluting its origins

The Lloyd’s building is also home to the Nelson Collection, a display of prized historical objects that honor Vice Admiral Horatio Nelson (a flag officer in the Royal Navy who won many decisive victories at sea) and serve as a reminder of its origins in maritime insurance.

This permanent exhibit contains such treasures as vases awarded by the Patriotic Fund at Lloyd’s in 1808 and 1809 to heroes of the Royal Navy; a detailed model of the HMS Victory, Vice Admiral Lord Nelson’s flagship at the Battle of Trafalgar, a key victory for the Royal Navy against the combined fleets of the French and Spanish Navies in 1805; and illustrations depicting Nelson’s funeral procession (below), which culminated in his internment in the crypt of St. Paul’s Cathedral.

A good scratch

When Lloyd’s underwriters receive underwriting authority, they register what is called their “scratch,” or their signature, which has legal force when issues of coverage approval are at stake.

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