Marine Cargo

FINA 227

MARINE CARGO INSURANCE

I) LLOYD’S OF LONDON

Lloyd’s is an insurance market located in London. It is the center of the world’s marine insurance and shipping intelligence. In the 17th century, insurance of cargoes and ships was often underwritten by merchants who were willing to carry part of the risk of a voyage in return for part of the premium. Commerce of various types was transacted among the merchants who met each other at various coffee houses around the City of London. Similarly, those wishing to transact insurance would meet in these coffee houses. One of these coffee houses was owned by Edward Lloyd, and situated near River Thames. It was frequently visited by merchants, ship owners, and others having interest in maritime ventures.

Lloyd’s Coffee House was in existence by 1688, although the original date of opening is uncertain. Edward Lloyd encouraged the merchants or underwriters because it brought extra business to his coffee house. He supplied shipping information and published a news sheet in 1696 called ‘Lloyd’s News’ (superseded some years after his death by ‘Lloyd’s list’, London’s oldest newspaper.

Since its establishment, Lloyd’s of London has developed a strong world-wide reputation for its ability to provide risk solutions for its clients. It must be recognized from the outset that Lloyd’s is not an insurance company. It is a market of individual and corporate ‘members’ who underwrite risks on shared, but competitive basis.

The key components of the Lloyd’s market are:

a) Lloyd’s members

Members of Lloyd’s provide the supporting capital on which the market is built. They could be either individuals or corporations. Corporate members include investment institutions and international insurance companies. Capital provided by members is used to underwrite insurance risks.

b) Underwriting syndicates

An insurance syndicate is a group of Lloyd’s members. Syndicates operate as independent business...