WORLD’S CRISES

Otago Daily Times, Issue 22831, 16 March 1936, Page 5

WORLD’S CRISES

REFLECTED IN LLOYD’S A ROMANTIC ROOM COMPANY ALWAYS PAYS The recent rite and more recent reduction in war-risk insurance on vessels sailing in the Mediterranean Sea bring Lloyd’s back into the news. Anything that affects the world’s risks affects Lloyd’s (says ii writer in the New York Times Magazine), for all the big losses, whenever they occur, eventually work back at Lloyd’s. If a ship sinks in the Indian Ocean or a hurricane smites Miami, or one’s wife has twins, Lloyd’s pays. It is the world’s shock absorber, Lloyd’s consists of about 1500 Englishmen ti'ho wedge themselves daily into the boxes of their immense room off Leadenhall street, where they supply any kind of short-term cover against any kind of risk anywhere. Lloyd’s itself writes no insurance. Its policies are written by its member underwriters as in dividuals —which explains why no policy is ever written at Lloyd’s for a longer term than 12 months. 11 a long-term business such ns life insurance were allowed, the underwriter concerned might be retired or even dead when the policy matured. Insurance companies the world over “lay off” their heavy risks in the big room at Lloyd’s. Twenty companies rent offices in Lloyd’s building, each paying 2500 dollars (£500) a year in addition to its rent for the right to enter “ the ■Room.” It was the coffee room in the original Lloyd’s, but in the new and palatial Lloyd’s of to-day it is just “ the Room,” with the chatter and roar of a thousand voices behind its big bronze doors, but with neither coffee on the tables nor sawdust on the floor. Clustered about Lloyd’s are the big buildings of insurance companies and shipping lines, swarming around the fountain-head of insurance like bees around a honey pot. Little men with their little risks also swarm around Lloyd’s. The humble citizen who fears that it is -going to rain on the day of his Sunday school picnic i« not allowed to go into “the Room’ in search of the policy he wants, but be can walk into Lloyd’s building just as boldly as if be were the North-South-East-West Insurance Company. Like anybody else who is not a member of Lloyd’s. I be gets no further than the counter in | the main corridor. He has to give the j “waiter” behind the counter the name of a broker whom he wants to see, and then he sits down while the broker is sent for. AN OLD CUSTOM. Not for a hundred years or more have the waiters at Lloyd’s had anything to do with cups of black coffee. Long ago they gave up wearing soiled white aprons and carrying stained white towels over their arms. Nowadays they are majestic beings in scarlet robes with black velvet cuffs and collars, and top hats with gold bands around them. But they ale still i called waiters. This is part of “ the | custom at Lloyd’s,” When the broker | appears, he writes the details on a slip of paper. “ The slip.” too, is part of “the custom at Lloyds’”—and a highlv important part. Then he goes back through the big bronze doors into “ the Room.” . Except under the dome in the middle, practically the whole floor of the greatroom is covered with high-backed benches with tables in front of them, like the j benches in old-fashioned coffee-houses. On these benches the underwriters sit with |

their clerics beside them. Some have a couple of clerks, some a dozen. Most underwriters now group themselves into syndicates, usually about 10 to a syndicate, although the biggest syndicates run to well over 100. Each syndicate restricts itself to one side or other of the great dividing line at Lloyd’s—marine or non-marine insurance. The broker walks around the noisy room to the likeliest underwriter, who takes a look at “the slip” and says yes or no. If he says yes he writes the amount of the premium on “ the slip,” initials it. and that’s that. The system is the same whether the broker’s client wants a policy against bandits in Tibet or against earthquakes in Tokio, or the Derby favourite’s breaking his leg or the Labour Party’s winning the election or against rust in the roses in the garden. The variety of risks that beset the human race is infinite. They have never been exhausted, and never will be, and Lloyd’s treats them all as part of the day’s work. But all this falls far short of defining Lloyd’s. It is the miracle of Lloyd’s that it has raised an unknown Londoner of the seventeenth century into a kind of presiding genius of shipping the world over. Edward Lloyd knew nothing about shipping and less about insurance. He ran a coffee-house near the London docks a little more than 200 years ago. Ho died in 1713, but when he was born or what he was like nobody knows. Insurers of ships happened to gather at bis coffee house because shipowners could always be found there.

Because of this accident of geography Edward Lloyd’s coffee bouse has long outlived him. Insurers of ships still gather daily on its high-backed benches to transact their business- across its tables, but nowadays there arc more than 1000 of them in the big room, and their business has expanded into a veritable empire of the sea. What would Edward Lloyd think of his gigantic coffee house now? What would he think if he found the North German Lloyd, the Rotterdam Lloyd, the Swedish Lloyd, and other foreign shipping lines using his name, not in connection witli cups of coffee, hut ns a world-wide symbol of integrity at sea? Non-marine insurance has now increased so much that to-day it constitutes more than half the total insurance written at Lloyd’s. It includes all the standard risks —fire, burglary, motoring, third party, fidelity guarantee, and all the rest. There is not a bank robbery in Chicago or a flood in China for which part of the risk has not been “laid off” at Lloyd’s. Provision is made for every sort of special risk that you could possibly think of. There was once a man who insured himself for £20,000 against the consequences of laying violent hands on his mother-in-law. Pure gambling is not encouraged at Lloyd’s, but nothing is prohibited except life insurance. All this is comparatively modern. The atmosphere of Lloyd’s is still the atmosphere of the sea. Neptune is on the ceiling of “the Room,” and at one end is an immense index recording the day's position of all the world’s ships. Waiters hover about it with handfuls of telegrams, adding details. The boll of the old British frigate Lutine hangs above the caller’s head in the towerlike rostrum under the dome in the middle of “the Room.” The dull roar that goes on all day, above the chattering, comes from the caller in the rostrum. Every time a broker is wanted in the corridors outside or at the-telephones below, the caller chants his name. Occasionally he has something momentous to chant: royalty is in the building, or an overdue ship has turned up at Foochow. For such announcements, two taps on tluLutine’s bell bring silence to the room. In an alcove flic world’s shipping casualties are posted in yellow flimsies on the casualty hoard. Overdue ships still figure among them, but telegranhs and wireless have greatly reduced their numbers. The days of sail were the groat days of overdue ships. With the owner’s wireless messages

from the captain at sea and, in the case of a ship ashore, the wires of the captain and of Lloyd’s agent and the agent of the salvage association, all three of them on the spot. “ the Room ” has almost ys much information as if it, too, were on the spot. Quick and reliable information from anywhere is the great cry at Lloyd s. Lloyd’s maintains its agents all over the world. There arc now about liiOO of them engaged in supplying every kind of information which might modify an underwriter’s rate or reduce his loss. To ” the information available, Lloyd’s publishes six separate periodicals, all connected with ships, cargoes and shipping law. The best known is Lloyd s List and Shipping Gazette, the oldest newspaper in London, except the official London Gazette, which the British Government publishes.' CIVILIAN ADMIRALTY. Lloyd’s Registry contains details of evq.ry ship afloat of 100 tons and up. It began in Edward Lloyd’s coffee house, hut is now so vast that it has become an independent organisation. Landlubbers know* it best through its familiar A 1 rating, which in modern times has been replaced by 100 AL ior steel and iron ships. . There is one other circumstance which sticks out all through the history of Lloyd’s and is particularly relevant in these days of crisis in the Mediterranean. Men who bear the risks of shipping in time of war inevitably exercise an influence on the navy, and Lloyd's lias in fact become a kind of civilian admiralty.

How Lloyd’s uses its information may be seen by taking any typical case of present-day ship insurance. Suppose that the little Italian steamer Chianti runs ashore at the entrance to Benghazi Harbour om the North African coast. She is insured in Italy, let us say, for 50.000 dollars (£10,000). at a 2 per cent, premium. Confronted with the prospect of a loss, her Italian insurers seek to cover part of their liability by reinsuring. They instruct their broker at Lloyd’s to get them a reinsurance policy for 20,000 dollars (£4000). „ , „ The broker walks rbund the Room to an underwriter who specialises in reinsurance. He may be a retired sea captain who has known Benghazi Harbour in time past. The telegrams from Lloyd's agent in Benghazi toll him where and how the ship is lying, how much water she has taken in, and what the weather is like. Ho finds out from Lloyd’s Register what her rating is, where she was built, and how old she is. He learns from her owners what her cargo is. He knows where the nearest salvage plant is. and he figures the probable salvage and repair costs. On the basis of all this, ho calculates that the Chianti is a good risk at a premium of 20 per cent. Once he has initialled “the ship,” a reinsurance policy for 20,000 dollars follows a s soon as the premium is paid. Suppose that the next morning another wire from Lloyd’s agent on the spot announces that the depth of water in the holds is increasing and the weather is changing. The Italian insurers cable their broker at Lloyd’s to gel them another 20,000 dollars of cover and the reinsurer at the same time covers 10.000 dollars (£2000) of his liability in a second reinsurance, both paying a rate which has now increased to 40 per cent. Suppose that later in the day Lloyd’s agent wires that a heavy leak has developed under the Water line and the Chianti is feared to bo a total loss. No underwriter will quote a rate after such news and the wreck i s now uninsurable. The Chianti’s owners in time collect their 50.000 dollars (£10,000) from the Italian insurers, and the insurers in turn collect their 40.000 dollars (£8000) from the reinsurers at Lloyd’s. Thus, while the risk. was originally carried by a single company in Italy, the loss in the end is borne by a number of underwriters at Lloyd’s as well as by the original insurers in Italy. ... Lloyd’s lias taken some historic hidings

in its time. The loss of the Titanic in 1912 was probably as great a blow ag any insurance market has ever met afld feurvived. On that disaster Lloyd’s paid out a total of 20,000,000 dollars (£4,000,000). Lloyd’s always pays.