Taking the Big Risks

As the world's best-known insurer, Lloyd's of London manages to thrive on modern risk while paying homage to 275 years of tradition. In Lloyd's five-story London headquarters, where it moved only six years ago, reports of ships lost at sea are still registered with an elegant quill, and attendants are clad in scarlet coat and black collar. Important news is heralded by strokes from an ancient battleship bell--one stroke for bad news, two for good. Last week Lloyd's had some bad news: it suffered one of its worst losses in Britain's great train robbery (see THE WORLD). This week, however, it will report some cheerier tidings: annual premium income has risen to a record high of $983 million.

Noses & Newborn Twins. Lloyd's old-fashioned ways cover a shrewd, practical attitude toward risk taking. Lloyd's prospers by conceiving new forms of insurance, accepting risks that no other insurer would dare, and keeping a wet finger in the shifting winds of world business, politics and science. It recently insured the on-time opening of the New York World's Fair next April. In February, Canada's missilemen scrubbed a scheduled launch just before countdown until liability coverage could be placed with Lloyd's -- the only in surer that would touch it. "But we exercise our ruthlessness and choose only those risks we feel are insurable," says one Lloyd's underwriter. World War II was partly insurable for Lloyd's, which sold monthly policies against death or dismemberment caused by buzz bombs after calculating the odds at 1,000 to 1. But nuclear war is quite another mat ter; Lloyd's has added a clause canceling all its maritime policies in event of East-West conflagration "whether there be a declaration of war or not."

Little else daunts Lloyd's. It has covered Durante's nose, Dietrich's legs, Callas' voice and Nikita Khrushchev's safety on his 1959 visit to the U.S. Many fathers of newborn twins have collected from Lloyd's, and 20th Century-Fox recovered $2,000,000 from Lloyd's when Elizabeth Taylor's illness delayed the filming of Cleopatra. Ever alert to a little publicity when the price is right, Lloyd's even covered a Manchester cinema against its patrons' strain, wrench or rupture due to "excessive laughter."

All this is mere jam to the real bread of Lloyd's, which issues one-third of all British insurance (except long-term life) and more than one-half of the world's maritime insurance. It sells some 2,000,000 policies a year in 150 countries and has 1,500 agents stationed the world over to follow the movements of every ship at sea, report on pilferage or disaster and settle claims. In recent years, the bulk of Lloyd's insurance has shifted from maritime policies toward aviation, accident, fire, burglary and motor insurance. Lloyd's now does half of its business overseas.

Men Only. Lloyd's policies are as modern as the offshore oil towers and methane tankers that it insures, but many of its traditional practices date to 1688, when London merchants began taking freelance flings in insurance from their roughhewn tables in Edward Lloyd's coffeehouse. In the 18th century, with the British government's blessing, Lloyd's insured both the British and Spanish fleets against capture by the other side. Over the years, it acquired a reputation for never failing to pay off--and pay off quickly. Lloyd's settled claims from the San Francisco earthquake for an astounding $100 million, and settled its Titanic claims of nearly $5,000,000 within two weeks after the sinking.

Not a single company at all but more of an administered market place, Lloyd's consists of 217 firms of brokers who buy coverage for their clients' risks from 280 highly individualistic underwriting syndicates. Tradition restricts membership in Lloyd's to British subjects, and women have yet to be admitted. Administering Lloyd's is an elected committee of twelve, now chaired by J.N.S. Ridgers, a specialist in deep-sea towing risks. The underwriting syndicates embrace 5,316 moneyed members--double the total in 1945--who collectively put up pieces of their personal fortunes and are liable for losses down to their last collar button. Membership is prestigious and highly prized. Among the current insiders are four Cabinet ministers (Hailsham, Maudling, Sandys, Thorneycroft), 52 M.P.s (predominantly Tory), Tycoons Charles Clore and Sir Isaac Wolfson, Actor Kenneth More and five dukes, eight marquesses, 39 earls, 90 knights and 113 baronets.

Back to the Colonies. Members average a handsome 8% return on the money they risk (some underwriting chiefs earn $140,000 yearly), but changing times have brought them modern-day migraines. British competitors are merging into scrappier combines, international airlines are buzzing about pooling their assets for self-insurance, and nationalistic governments are pressuring their businessmen to place more of their insurance at home.

In the U.S., all states except Illinois and Kentucky impose great restrictions on Lloyd's operations. But there are high hopes for a bill, now being considered in the Senate Subcommittee on Antitrust and Monopoly, that would permit foreign insurers to operate more freely. In any case, Lloyd's is not really worried about the future. It believes that, year after year, the world is becoming a riskier place.

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