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Lloyds of London consists
of over 20,000 individual members who underwrite insurance for their own
account and at their own risk. The corporation, which generally provides
higher risk and specialized car, aviation,marine, and other insurance
services lays down strict financial rules and regulations but does not,
itself, undertake any insurance risk.
Members of Lloyds are gathered into syndicates, several hundred in all,
each one comprising of anything up to several hundred members. Insurance
business is accepted by underwriting agents who represent these sydicates
and negotiate policies and premiums on their behalf. This system of
syndication grew up to cope with the substantially raised insured values
of today because it allows a particular insured risk to be spread over
several people so that when a claim is made against a policy, every
underwriter is only responsible for his share of it. Members of the
syndicate who do not in fact carry out underwriting themselves are known
as “names.” Traditionally, names were responsible to their last shirt
button for the risks arranged for them for them by their underwriting
agents but after huge personal losses and severeral high-profile
bankrupcies in the late '80s and early '90s changes had to be made and as
from 1993 an individual's losses were capped at 80% of his total allowable
yearly premium income for four years. Any losses which exceeded this would
be settled from a communal fund provided from a levy of all members. The
same year a decision was made to let companies and institutions get
involved in its underwriting functions for the first time.
The history of Lloyds goes back to 1688, when a gentleman named Edward
Lloyd had a coffeehouse in Lombard Street, London where merchants,
bankers, and seamen got together to do business. It was also a popular
venue for underwriters - people who would insure ships and their cargoes
against the payment of a premium. For a while Edward Lloyd published a
magazine called "Lloyd's News", which contained news about the voyages of
ships; this was how "Lloyd's List" was born, in 1734.
It was not long before the underwriters at Lloyd's got together and, in
1774, transferred first to the Royal Exchange, then in 1928 to Leadenhall
Street and subsequently to a new building in Lime Street in 1957. In 1986
they moved to a new, architecturally dramatic building with a huge, high
atrium adjoining Leadenhall Market.
Their activities were formalised 1871 when the way that the associations
affairs were controlled by the ruling committee were put together by the
Lloyd's Act of 1871 which gave it the ability to enact its own bylaws, to
accumulate property both real and personal and and to act as a
corporation. By this act Lloyds was limited to marine insurance, but by a
further act in 1911 it was enabled to insure just about anything at all.
After a number of financial scandals (nothing much has changed, has it?)
in the late '70s and early '80s a new constitution was passed by
Parliament in 1982 to modernise the original one. So as to try to avoid
possible conflicts of interests, the new act laid down rules to restrict
the amount of interest that a lloyds broker could have in an underwriter.
It also set up a formal governing body to create and alter bylaws and to
constitute committee to consider disciplinary matters, and an internal
court of appeal.
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