History

The Lloyd's market was established in 1688 by Edward Lloyd, who opened a coffee house in London that became a popular meeting place for ship owners, merchants, and later the first marine insurance underwriters.

Lloyd's coffee house soon became a hub for gathering information about shipping and insurance, where underwriters would take on risks by signing their names (known as "underwriting") on insurance policies to cover potential losses from maritime voyages.

Over the years, Lloyd's evolved and expanded beyond marine insurance, entering other lines of business such as property, casualty, aviation, and more.

Known for taking on pretty much any insurance policy, a vast number of bizarre things have been secured through the Lloyd’s market. These have included world-famous food critic Egon Ronay insuring his taste buds for $400,000 in 1957. This was surpassed in 2009 when Costa Coffee took out a £10m policy against the prospect of their chief coffee taster, Gennaro Pelliccia, losing his sense of taste.

After significant losses in the 1980s, Lloyd’s has undergone significant reforms to ensure that investors are suitably protected. For example anyone who invests at Lloyd’s today is protected by their limited liability vehicle. Financial requirements for underwriting were also reformed, with checks made to ensure there were enough liquid assets available to back any losses. In recent years a renewed focus on assessing risk has also meant that investors are much better protected.

In 2003 the Franchise Performance Directorate (FPD) was established to ensure that Lloyd's undertook an active commercial role in managing market performance. Among its goals was to transform Lloyd’s into a modern, transparent and profitable marketplace and to create and maintain a commercial environment in which the long terms returns to all Members is maximised. Over the last 20 years the market has produced attractive returns and the Lloyd’s brand is once again known for quality, innovation and effective governance.

The governance and oversight framework for the Lloyd’s market is designed to ensure that both the Corporation and managing agents in the Lloyd’s market have robust and comprehensive systems of governance, risk management and internal controls. The underlying objective of this overall framework is that the Corporation and the market actively manage risks to the Central Fund, Lloyd’s licences, ratings and brand and to ensure good outcomes for policyholders.

Lloyd’s remains one of the oldest, most venerable and well regulated insurance markets in the world and in light of ever-more uncertain political and environmental events Lloyd’s – and insurance in general – is seen by many as a much safer than other forms of alternative investment.

Lloyd's is regulated by the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) in the United Kingdom while Hampden is authorized and regulated by the FCA and the Corporation of Lloyd’s. These regulatory bodies ensure that the market operates in a fair, transparent, and financially sound manner.

As well as these external regulatory bodies, the Corporation plays a key part in monitoring the marketplace and protecting policyholders and Members.

This includes agreeing syndicate business plans and capital requirements and evaluating performance against business plans. Lloyd’s reviews each syndicate’s business plan and, if the managing agent is able to demonstrate that the plan is appropriate and justifiable having regard to its performance and capabilities, then Lloyd’s will agree the plan. The managing agent must then underwrite in accordance with that plan, compliance with which is monitored by Lloyd’s.

Another key measure has been to set out the 13 Principles for doing business at Lloyd’s (“The Principles”). The Principles articulate the fundamental responsibilities and outcomes expected of all managing agents in order to support the market’s overall performance, capital strength, financial and reputational credibility.

The Corporation is under statutory and regulatory obligations to act prudently in its oversight of the market, in particular to maintain market stability, protect its credit rating and prevent underwriting behaviour which threatens the Central Fund.