Commercial insurance underwriting – born in a 17th century London coffee shop in – has been forced to change methodologies due to Coronavirus but remains as relevant a skill as ever, potentially becoming even more important in the post-Coronavirus era.
The concept of commercial insurance provision was devised by Edward Lloyd, a man well-versed in marine news who recognised that mariners needed protection for their cargoes. Marine insurance became his coffee house’s speciality and by the 1730s he was dominant in the shipping insurance world.
By the time of the American Revolution (1770s) and the Napoleonic Wars (early 1800s), marine insurance had become a necessity. The Lloyd’s coffee house had become a den of gambling and dabbling in speculative risks, so the Lloyd’s marine business left and set up in new premises, where broker, John Julius Angerstein, became a formidable underwriter, on a global scale.
In 1799, the loss of insured ship, The Lutine, which ran aground off the Dutch coast, losing her cargo of gold and silver, was a stark reminder of the risks faced. In 1858, when her bell was salvaged, it was hung in the Lloyd’s underwriting room. A tradition of ringing it once if a ship was lost and twice if it returned home safely, was born.
By then, Lloyd’s had competition from Nathan Rothschild’s Alliance Insurance Company, formed in 1824 and was insisting on more financial security behind its members. In 1870, a new development – writing business for a 12-man syndicate rather than two or three, saw Lloyd’s regain ground. Only a recognised Lloyd’s broker could sign a Lloyd’s policy after 1871 and the signing of this became a ritual, upheld to this day and accompanied by a flourish of fountain pen and ink, with sometimes 20 signatures and stamps on each deal. But things have had to change.
For the first time ever, in over 300 years, the Lloyd’s underwriting room has closed. Queues of brokers lining up at underwriters’ desks to finalise deals were hardly conducive to social distancing, so The Lutine Bell has been rung for what could be some time. Underwriters within more than 90 Lloyd’s syndicates have packed up their pens and gone digital, embracing new technology. Face-to-face meetings have given way to video conferencing and underwriting room banter has been replaced by the remote wearing of “silly hats”, to keep up the spirits of those who have done the day to day broking, astute underwriting and even the exceptional underwriting feat of insuring the hands of Rolling Stones guitarist, Keith Richards.
The provision of insightful insurance covers continues, however, and Coronavirus is probably the catalyst for a change that had to come. CEO John Neal is accelerating change and the Lloyd’s community is embracing electronic trading.
The lesson is that, whilst risks may change, the Lloyd’s market, to which we can offer our clients superb access, remains at the heart of commercial insurance broking. The Lutine Bell is a reminder of what can go wrong but also the symbol of an underwriting entity that has its finger on the pulse, ensuring that businesses like yours have the protection you need, through brokers like ourselves privileged enough to be able to access and offer what Lloyd’s provides. The methodology is different; the benefit unaltered.