facilities agreed to merge. By the early 1880’s half of the
ships worldwide had been surveyed, classified, and added
to the records of the registry.
From Edward Lloyd’s time to the present day there have
been major changes in the construction, power, and
nature of ships. Sailing ships powered by wind gave way
to vessels powered by steam, and then oil, and even solar,
and then nuclear energies. Timber construction was
replaced by iron which allowed vessels to be built much
bigger than they had been in the past. The introduction
of iron then led to the construction of other kinds of
large vessels such as container ships, cruise ships, oil
tankers, car ferries, and ice breakers to name a few. Today
the Lloyds registry of shipping is still in existence and
is known worldwide for its expertise in ship design and
safety.
Over time, the value of these vessels increased. Many of
the individual underwriters in the market place who had
been accepting small portions of insurance contracts
on their own behalf realized that to accommodate the
larger risks they needed to find a way of accepting larger
portions of contracts. The underwriters overcame this
issue by organizing themselves into formal groups. As a
group the underwriters could accept much larger and
more meaningful portions of the risks being offered to
them.
Each group elected one of its members to make all
underwriting decisions on behalf of the whole. Each
member then received an agreed upon percentage of
every risk written by the elected underwriter. These
groups were not formed as companies but as nonincorporated associations of subscribing members which
are now referred to as “syndicates.” The group members
who did not have the responsibility of underwriting, but
did accept a percentage of each risk were called “Names.”
Cuthbert Heath
In 1877, a Lloyd’s underwriter, Cuthbert Heath, wrote the
first policies covering property on land. As the story goes,
when logging his first property transaction Heath did
not know how to class the risk. Up until then he had only
ever written marine risks. It was decided that all on-land
property risks would be considered “non-marine.” To this
day Lloyd’s, in most instances, still refers to these types of
risks as non-marine.
Cuthbert Heath was also the first underwriter to issue
policies that provided earthquake coverage for clients in
the United States. Over a short period of time he was able
to build up a sizable volume of business. In the famous
1906 earthquake in San Francisco Cuthbert suffered
enormous financial losses. However, rather than limit
the coverage he had created to that of the initial impact,
Cuthbert instantly instructed his representatives in San
Francisco to pay all of his policyholders in full. Not only
did they receive cover for the quake damage, but also
they received cover for all of the subsequent fire damage
incurred, which was not specifically covered under
his policies. Since that time earthquake policies have
included subsequent fire damage.
This compassionate act by Cuthbert Heath greatly
enhanced the reputation of Lloyd’s in the United States as
well as in many other parts of the world.
Growing membership
In 1968 the members of the society realized that
they did not have enough participants, or Names,
in the marketplace to adequately provide cover for
the capitalization of the larger risks that Lloyd’s was
underwriting. To encourage more people to join and to
reduce the large capitalization requirements, membership
restrictions on nationality and gender were removed. This
change attracted many new members and the number of
Names at Lloyd’s increased to about thirty thousand.
Around that time a number of British farmers decided
to join and become Names. They realized that instead of
putting up cash as collateral, they could pledge all or part
of the land they owned. This strategy allowed the farmers
to not only make money from farming, but also it allowed
them to reap the rewards of becoming a Name at Lloyd’s
with no real outlay.
Financial Trouble
In the late 1980’s Lloyd’s started to go through perhaps
the most difficult period in its history. Two factors had a
major impact on the organization. First, an accounting
practice known as