Lloyds of London

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Lloyds of London
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Lloyds of London

• Presented by
• Idriss Ould
• Ezequiel Rodriguez  
• Dustin Williams

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History of Lloyds

• Ezequiel Rodriguez

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Lloyds of London

• Lloyds is not a company. Lloyds is a society
  of individual and corporate members, each of whom
  accepts insurance risks as members of one or more
  underwriting syndicates. Individual members are
  liable to the full extent of their private wealth
  to meet their insurance commitments, while the
  corporate entities trade with limited liability

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Early Days

• Lloyds began as Edward Lloyds side coffee
  house, located on Tower Street of London
• The exact date of establishment is unknown, yet
  evidence exists that Lloyds coffee house was
  well known by London business circles in 1688

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Edwards Coffee House

• These types of houses became commercial meeting
  points, where not only underwriters met, but also
  a variety of other different businessmen
• Edward himself was not involved in insurance
• He provided premises, reliable shipping news and
  a variety of services to enable ships captains,
  merchants and other rich men to carry on their
  business of insuring ships and their cargoes

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Initial Underwriting

• Lloyds early underwriters were wealthy
  individuals in the coffee house who agreed to
  take a share of a risk by signing their names on
  the policy
• They would set the amount they were willing to
  cover
• In 1691, he moved his business from Tower Street
  to Lombard Street

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Edwards Accomplishments

• In the late 1690s, he published his first paper
  called Lloyds News
• Shortly after that, Lloyds Weekly London
  Newspaper became his second
• Unfortunately he died before his most famous
  collection, the Lloyds List, was published
• The first editions were shipped in 1734
• Lloyd died in 1713, yet his coffee house
  continued to prosper as a center for marine
  insurance

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The Bubble Act of 1720

• Gave two newly formed corporations the exclusive
  right to transact marine insurance as
  corporations
• The London Assurance
• The Royal Exchange

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176os

• Some underwriters who disapproved gambling
  insurance broke away
• They persuaded Thomas Fielding, a Lloyds waiter,
  to open a New Lloyds Coffee House

• In 5 years it drove the old Lloyds out of
  business

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1770s

• In 1771, nine merchants, underwriters, and
  brokers formed a committee which took over the
  premises and appointed two masters to run them
• Lloyds moved into the Royal Exchange in 1773
• By 1774, the Life Assurance Act finally
  prohibited gambling insurance
• The decision was successful and prosperous for
  the insurance business

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The Society of Underwriters

• In 1769, a number of Lloyds more reputable
  customers decided to break away and set up a
  rival establishment that would be devoted
  strictly to marine insurance
• Because of the competition, Lloyds was forced to
  increase their underwriting standards
• Now, only members of Lloyds of London are
  allowed to accept insurance business
• The marine insurance industry was getting a new
  format, not everyone was allowed to underwrite,
  but only does accepted by the committee

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Lloyds Act of 1871

• The Society of Lloyds was incorporated by the
  Lloyds Act of 1871, which provided the business
  with a legal basis and laid the foundations of
  todays market

• Lloyds has become an international market for
  insurance risks of almost any type
• In 1906, Lloyds underwriters met claims from the
  San Francisco earthquake

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Lloyds List

• In 1734, Lloyds List was established as a
  regular weekly publication
• Lloyd's List is a British publication that gives
  details of vessel movements, marine casualties,
  and other information of interest to the merchant
  shipping community

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Present Day

• Today, Lloyds has drastically changed from the
  one in the past
• Now, insurance can only by written by approved
  insurance brokers, known as Lloyds brokers
• There are nearly 29,000 individual underwriting
  members, or Names, grouped in some 400
  underwriting syndicates
• It is important to know each syndicate is not a
  partnership
• Each member is liable only for a personal
  fraction of any risk.

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Risks of Lloyds

• Dustin Williams

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Marine Insurance

• Marine insurance is oldest form of insurance
• Largest marine insurer in the world

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Marine Insurance

• Marine rates after 9/11
• War-risk charges vs. Pakistan

• SPACEHAB laboratory
• U.S. - 8 million
• Lloyds - 17.7 million

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Aviation Insurance

• 40 of world aviation insurance is in London
• Covers losses occurring from manufacturing, use,
  or operation of aircraft.

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Motor Insurance

• Largest provider of private motor vehicle
  insurance in UK
• 15 of all policies written
• Least prominent non-life line of insurance

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International Property

• Have insured US embassies in the past
• Created first terrorist attack policy
• Covers buildings on 10 US military bases
• Excludes loss of life and chemical/nuclear
  warfare
• Being purchased by high-risk areas in NY

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Sports Insurance

• Willis McGahee injured knee in Championship game
• Disability coverage began two weeks before injury
• 20,000 in premium, 2.5 million return (if
  unable to recover and play again)
• May collect Jan. 3, 2004

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Horse Insurance

• Lloyds is recognized as worlds largest
  thoroughbred horse insurer
• Support Equine Disease Quarterly, publication of
  equine disease occurrences

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Hacker Insurance

• Joined Counterpane Security Inc. to help monitor
  losses
• Covers loss of revenue or information assets
• Repayment and replacement costs
• Other cyber-damage

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Musician/Celebrity Insurance

• 1920s movie star Bill Turpin insured 20,000
  against his eyes uncrossing

• Shortly after, Jimmy Durante insured his
  infamous schnozzola

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Musician/Celebrity Insurance

• Fred Astaire had 75,000 of insurance for each leg

• A 28,000 policy was written against Betty Davis
  gaining weight

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Musician/Celebrity Insurance

• Christy
• Turlington
• And
• Claudia
• Schiffer
• insured
• their
• faces

1 million 5 million
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Musician/Celebrity Insurance

• Lord of the Dance Michael Flatley has 25 million
  (39.24 million) of coverage on his legs.

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Musician/Celebrity Insurance
Black Crowes vs. Lloyds of London

• In Feb. 2001, the Black Crowes filed
  mulit-million lawsuit
• Claimed Lloyds demonstrated bad faith and breach
  of contract

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Performance of Lloyds

• Idriss Ould

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2001 Annual Statement

• Second Largest Commercial Insurer
• Seventh Largest Reinsurer
• 88 Syndicates
• 100 countries
• Premiums totaled 18 billion

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Assets
745,013,181 9,656,330 3,
905,768 665,865,820 6,993,561,491 8,414,096,822
(646,280) 10,648,760
20,835,522,349

• Bonds
• Common Stocks
• Cash
• Investments
• Aggregate Write-Ins for Invested Assets
• Subtotals, Cash, and Invested Assets
• Premiums and Agents Balances in Collection
  
• Interest, Dividends, and Real Estate Income
• Total
  
  

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Cash from Operations

• Premiums Collected Net of Reinsurance
• Loss and Loss Adjustment Expenses Paid
• Underwriting Expenses Paid
• Cash from Underwriting
• Net Investment Income
• Net Cash from Operations
  
  

(22,748,581) 141,603,640 (3,4
39,249) (160,912,972) 96,891,754 (64,021,218)
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Cash from Investments

• 1,959,880,238
• 918,706
• 8,759,376
• (13,409,242)
• 1,582,567,298
• 373,581,780

• Bonds
• Stocks
• Net Gains (Losses) on Cash and Short-Term
  Investments
• Misc. Proceeds
• Other Invested Assets
• Net Cash from Investments

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Income Statement

• Underwriting Income
• Investment Income
• Other Income
• Capital Surplus
• Gains (Losses) in Surplus

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Underwriting Income

• Premiums Earned
• Losses Incurred
• Other Underwriting Expenses
• Net Underwriting Gain (Loss)

• (18,691,571)
• (140,995,360)
• (3,439,249)
• 125,743,038

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Investment Income

• Net Investment Income Earned
• Net Realized Capital Gain (Loss)
• Net Investment Gain (Loss)

• 86,368,756
• 29,397,966
• 115,766,722

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Sept. 11, 2001

• 9/11 - Single largest loss of any insurer

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Market Share of Premiums
40
Market Share of Premiums
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Combined Ratio
Combined Ratio 98.6 (2000) 140.3 (2001)
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Method of Accounting

• Lloyds operates under 3-yr. accounting system
• Results are not declared until closed
• Closed 3 years from beginning of year
• Being phased out to be comparable