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A FAST-PACED, INSIDER ACCOUNT OF THE NEAR- RUIN AND AMAZING RECOVERY OF THE WORLD’S OLDEST AND LARGEST INSURANCE MARKET
ON THE BRINK:
HOW A CRISIS TRANSFORMED
LLOYD’S OF LONDON
By Andrew Duguid
This is the story of how huge losses very nearly destroyed the
world’s oldest and largest insurance market. Thousands of
members were trapped, often facing unaffordable bills of a million
pounds or more. This led to agony, outrage and self-help. New leaders
emerged, formed action groups and sought justice from the courts.
A complacent institution was forced to think again, repair some of the
damage and re-invent itself. To confront its biggest crisis ever, Lloyd’s
found inspirational leaders, hidden talents among its members and
hired formidable experts. At times the financial chasm looked too
wide, the breakdown of trust too deep, to be crossed.
How could this happen after ten years of reform? What were the
causes of these huge losses? Was the disaster the result of fraud,
incompetence or just bad luck? Could a way be found to meet the
debts, renew the capital, restore enough trust to strike a deal and
rescue the hardest hit? Could this be done within the constraints
of the strict law governing insurance, in Britain and the US, and a
highly competitive international marketplace? The response had
to win over the members, while retaining the confidence of
regulators and customers. It had also to attract investors and
retain market professionals, many of whom had tempting
opportunities elsewhere. It was a Rubik’s cube with little
scope for trial and error.
This book tells what really happened,
from the inside.
Publishing August 2014 | 9781137299291 £24.99 | $39.99 I $45.99 CAN Hardback I 234x156mm I 352pp
EXTRACT #1 - ‘PREFACE’
DID YOU KNOW? The current Lloyd’s building was designed by Richard Rogers and took eight years to build. It is nicknamed the ‘Inside-Out’ building.
DID YOU KNOW? The Lutine Bell, which hangs in the Underwriting Room, is synonymous with Lloyd’s. Traditionally it has been rung to herald important announcements – one stroke for bad news and two for good. Today the ringing is generally limited to ceremonial occasions.
DID YOU KNOW?
Lloyd’s began life as a 17th Century coffee
house. Started by Edward Lloyd, the
establishment became recognised as the
place to go for marine information and soon
for insurance too.
P R O F E S S I O N A L F I N A N C E Learn more at www.palgrave.com/professionalfinance
When George Pataki was elected as the Republican Governor of New
York State, he made many fresh appointments. He knew exactly
who he wanted to put in charge of the NY Insurance Department, as
Superintendent. A few years previously, Ed Muhl had proved a popular
and capable Insurance Commissioner for the state of Maryland. His
fellow regulators had elected him president of the National Association
of Insurance Commissioners.
The first day he took up the job, Muhl called the senior staff together...
He explained that there were going to be some changes in the way the
Department was run... At the end of his speech he asked if there was
anything significant he needed to know about? Was there anything
important that needed to be signed? Muhl says “I should never have
asked the question because a young lady from the legal department
raised her hands, and said ‘you probably ought to know about this,
Superintendent.’ She handed me a report on the Lloyd’s of London
US trust fund, saying ‘Lloyd’s is insolvent. We need to de-accredit
Lloyd’s in the US as a surplus lines writer and as an accredited
reinsurer.’ There was probably a very loud sound when my jaw
dropped and hit the desk.”
EXTRACT #2 - ‘VIEW FROM NEW YORK’
EXTRACT #3
BREAKING THE MOULD
On Friday afternoon, Peter Middleton stood up to discuss his approach
to a new settlement. It was nearly 12 months since the failure of the
first offer. Middleton had no notes, no slides, nothing to indicate any
preparation. He had been talking to action group chiefs, notably their
newly-established leader Michael Deeny: he knew much more about
their attitudes than anyone else in the room. Deeny’s hand had been
strengthened by his recent massive legal victory. Names had just won a
key legal decision in the Clementson and Mason cases, meaning it could
take at least another year before Lloyd’s could resume debt recovery
proceedings. Others still regarded action group leaders as traitors.
After a few minutes, Middleton dropped a bomb. The only way there
could be a settlement was to cap Names’ liabilities and write off some
of the debts from people who were not willing to pay, as well as from
those unable to pay. The two deputy chairmen, Hiscox and Stace,
were outraged. For them, it was unthinkable to let “won’t pays” off so
lightly. After only a brief discussion, Middleton announced that he had
a private engagement and left the whole gathering. In his absence, he
received much criticism that evening; gloom descended as the meeting
finished earlier than planned on Saturday morning. The general view
was that Middleton had become over influenced by the action group
leaders. In short he had gone native.
DID YOU KNOW? Lloyd’s has hit the headlines for insuring the weird and wonderful body parts of celebrities. Some examples include Tina turner’s legs, Keith Richards’s hands and Egon Ronay’s taste buds!