Insurance timeline: The early history of Lloyd’s of London
British insurance and reinsurance giant Lloyd’s can actually be traced back to ‘Lloyd’s Coffee Shop’, a business founded by Edward Lloyd in Tower Street, London.
Known as a hot-spot for the latest shipping news, the shop was frequented by bankers and merchants connected to marine brokerage and insurance. Over time, this informal gathering became a legal enterprise of its own.
Edward Lloyd died in 1713 but his eponymous company maintained its popularity. Shipping news began to be circulated in ‘Lloyd’s List’, a newspaper that remains in print even to this day. This free flowing stream of information would prove crucial to the business’ expansion.
1771 to 1871
Lloyd’s formed an official committee and structured itself as an association of members. In 1871, the British Parliament passed the Lloyd’s Act to make the organisation an official business entity, thereby also restricting use of the name to its own underwriters.
Owing to the British Empire’s formidable maritime trade, Lloyd’s became highly profitable in the 19th century (Britain accounted for 25% of freight in Europe, much of which was insured by the company).
A major earthquake in San Francisco destroyed an estimated 80% of the city. As a major insurer for the area, Lloyd’s underwriters lost significant sums of money by processing the subsequent claims, which ranged from fire damage to structural collapse.
Although other insurers attempted to circumvent having to pay out, lead underwriter Cuthbert Heath instructed Lloyd’s employees to "pay all of our policyholders in full, irrespective of the terms of their policies.”
It would be far from the last natural disaster that Lloyd’s would need to deal with, but its highly ethical handling of the matter crystallised a trustworthy reputation among US businesses.