Lloyd’s of London is one of oldest and best known insurance entities. Lloyd’s is not an insurance company, rather it is an insurance market that is overseen and regulated by the Lloyd’s Company. This company makes it possible for those with complex risks to find the coverage  they need.

History of Lloyd’s of London

In the 1600s, London’s importance as a ship and cargo insurance center grew. Edward Lloyd opened a coffee house that was seen as the best place to go for marine information and insurance. By the 1730s, Lloyd’s began to dominate the shipping insurance market.

By the 1900s, Lloyd’s offered many types of insurance cover in addition to maritime risks. Also the Lloyd’s market was instrumental in the development of today’s risk-based pricing. Over time Lloyd’s developed its open market based on the practice of spreading the risk among several syndicates. Syndicates are the insurer for all intents and purposes. This strength-in-numbers approach allows Lloyd’s syndicates to offer broad and diverse coverage for many different types of risks.  The spreading of risk also protects against the pitfalls of one particular insurer becoming insolvent. Today, Lloyd’s operates from their iconic “inside-out” building. Built in 1986, the building’s pipes and ducts are on the outside, leaving a clean and uncluttered space inside.  The Lloyd’s workplace, known as the “market” is quite different when compared to the traditional United States workplace.  There are large open floor spaces with syndicates located within a few feet of each other.  The area in which the underwriters sit is known as “the box.”  Brokers come into the market and present risks to the underwriters in the hopes that an underwriter will agree to put a “line on the slip.” Each syndicate has a unique number and symbol which they can stamp onto a piece of paper brought to them by the broker.  This stamp signifies that the syndicate has agreed to accept a portion of the total insured risk. The broker visits as many syndicates as necessary to secure 100 percent cover.

How Does Lloyd’s Work?

Lloyd’s offers custom insurance solutions for unusual types of risk. United States “cover holders,” the term used to refer to the excess and surplus lines agencies that have contracts with Lloyd’s syndicates, work with their London brokers to place business in the London market.  Risks can be placed on a “binding authority” basis or on the “open market.”  Binding authority means that the coverholder has the pen for Lloyd’s, pursuant to a written contract that provides guidelines and parameters for the coverages that the coverholder can offer. Typically there are several syndicates participating on any one binding authority agreement pursuant to a percentage share. On an open market risk, the coverholder sends an account to their London broker who must then bring it to the market to find syndicates who are willing to put down a line, as described above.  Coverholders, brokers and syndicates work together to offer broad coverage for hard-to-place risks that don’t fit the standard market.

This large system remains well-regulated, highly trustworthy and reliable. A.M. Best has given Lloyd’s an A rating (Excellent) while Standard & Poor and Fitch gives them an A+ (Strong). Through its unique mix of coverholders, brokers and syndicates, Lloyd’s of London gives a wider array of businesses and individuals the coverage they need in a setting that reduces insurers’ risks.

Quaker Special Risk has a unique place in the Lloyd’s market.  We’ve partnered with Lloyds syndicates for over 30 years. Today Quaker has over $6 billion dollars in aggregated capacity and over $30 million in total risk limits in the market.  Currently, 18 syndicates participate on Quaker’s binding authority contracts.  We value our relationship with Lloyd’s greatly and look forward to a continued partnership for many years to come.