by Linda Collison
Ships have always played a major role in the import and export of goods; even today, ninety percent of world trade travels by sea.[i] Yet there are obvious risks to be assumed when deep water and Mother Nature, pirates and enemy ships are involved.
The concept of maritime insurance is as old as civilization. Thousands of years ago Chinese river traders minimized their risk by deliberately spreading their cargo throughout several ships. The Babylonians practiced bottomry, an arrangement in which the ship master borrowed money upon the bottom of his vessel, and forfeited the ship itself to the creditor, if the money with interest was not paid upon the ship's safe return.
About 600 AD, Danish merchants began forming guilds to insure its members against losses at sea, and merchant cities such as Venice and Florence started using a form of mutual insurance recorded in documents. The Lombards brought the concept of marine insurance to northern Europe and England in the 13th Century where the Hanseatic League further developed the means to protect their joint economic interests.
Permit me to fast-forward four hundred years to the 17th century; the rise of English merchants and the search for new markets abroad. Let’s pop in to visit London, now an important trade center, and walk along the waterfront…
Lloyd’s of London began as a coffee shop on Tower Street, founded by Edward Lloyd in 1688. His establishment, located near the waterfront, soon became a popular meeting place where ship owners and merchants could meet with financiers to discuss ways to match the risks they faced at sea with the capital needed to insure them.[iv]
Coffeehouses were then enjoying a great popularity in London and many other European cities. By 1675 there were more than 3,000 of them throughout England.[v] Coffeehouses were social places where men with similar interests met to exchange news and do business, while enjoying the stimulating brew. Much like your corner Starbucks where friends surf for jobs on their laptops while sipping Frappuccino’s and interviews are conducted over Venti Iced Skinny Mochas, 17th century Londoners did business while getting buzzed on the bean.
Lloyds was never an insurance company, per se, but instead was a market – a regular gathering of people for the purchase and sale of provisions or other commodities. At Lloyds coffeehouse merchants and shipmasters caught up on latest shipping news, bid on cargos of captured prizes, and obtained insurance for their ventures. The underwriters, wealthy men referred to as “Names,” were the individuals who pledged their own money to insure a particular voyage.
In 1691 Edward Lloyd relocated his coffee house from Tower Street to Lombard Street, where a blue plaque hangs today. The business carried on in this location until 1774 when the participating individuals moved to the Royal Exchange on Cornhill and called themselves the Society of Lloyds. An Act of Parliament in 1871 gave the business a sound legal footing, incorporating it. Although Ed Lloyd died in 1713, his name remains and is eponymous with the insurance of one-of-a-kind treasures, including Betty Grable’s legs and Bob Dylan’s vocal cords.
The present Lloyd’s building, designed by architect Richard Rogers, was completed in 1986 on the site of the old roman forum on Lime Street. In the rostrum hangs the original Lutine Bell. Back in the days of the coffee shop, one of the waiters would strike the bell when the fate of an overdue ship became known. If the ship was safe, the bell would be rung twice and if it had gone down, the bell would be rung only once, to stop buying, or selling of “overdue” reinsurance on that vessel. ( To see an early Hollywood recreation of Lloyds watch the 1936 movie, Lloyds of London, with Tyrone Power in his first starring role.)
In his book, The Romance of Lloyd’s, Commander Frank Worsley (of the Shackleton Expedition) sings the praises of Lloyds, crediting the association with various philanthropic efforts, including the development of the lifeboat service in Britain. In 1802 Lloyds members voted a donation of one hundred guineas to Henry Greathead, the inventor of the first practical lifeboat and set aside two thousand pounds for the provision of lifeboats on English and Irish coasts.
|Modern lifeboat in Howth, Ireland|
Lloyds was also instrumental in the creation of a Patriotic Fund in 1803, granting bounties or annuities to wounded men and the dependents of those killed in battle. Lloyds headed the fund with twenty thousand pounds, although the record shows that laborers, servants, schooled children, soldiers and sailors, sent their pence and more. Officers and men of the Army and Navy contributed sums ranging from one day’s pay to a whole month. A provisional committee was appointed to manage the Fund, which became a national institution.”
|Slavers throwing overboard the Dead and Dying — Typhoon coming on |
The Slave Ship -- J.M.W. Turner artist
On a much darker note, Lloyds was heavily involved insuring ships in the slave trade as Britain became the chief trading power in the Atlantic. Between 1688 and 1807, when slave-trading was abolished, British shipping carried more than 3.25 million people into slavery.[ix] It may be argued that the individual men who underwrote slave ships acted within the laws of the time and reflected the values of the society in which they lived, yet descendants of black American slaves have accused the Lloyd’s of London insurance market (and two United States companies) of profiting from the slave trade in a lawsuit seeking billions of pounds in damages.[x] The past can indeed come back to haunt us.
Lloyds has always worked closely with the Royal Navy to the benefit of both. Historian Steven Maffeo relates how the insurance market and the British Post Office were important to the Navy’s intelligence gathering throughout the Napoleonic Wars, the news of the victory at Trafalgar being posted at Lloyd’s even before the London newspapers broke the story. During the 18th century Lloyds developed a unique system of maritime intelligence of arrivals and departures which was sent immediately to the Admiralty, who in turn forwarded convoy and other useful information to Lloyds.
|Bark Endeavour, a vessel similar to Canopus in Barbados Bound|
Convoy, the practice of escorting groups of merchant ships by a naval warship, was common practice during the war years of the 18th, 19th, and early 20th centuries, to reduce the loss of ships and cargo to the Enemy. At the beginning of my novel Barbados Bound the merchant ship Canopus is carrying gunpowder and traveling in convoy from England to Madeira during the Seven Years War. From Madeira Canopus must strike out alone across the Atlantic to delivery the gunpowder on time – and of course Murphy’s Law intervenes. Shipmaster Blake says that his ship’s guns are his insurance, though of course they would be no real match against a French privateer, hungry for prize.
Lloyds Register is filled with stories of profit -- and disaster. The sinking of the “unsinkable” Titanic in 1912 represented one of Lloyd’s biggest losses, along with other major catastrophes such as the 1906 San Francisco Earthquake, the attack on New York’s World Trade Center, Hurricane Katrina, Asbestos damage claims, and the 2011 Tohuku earthquake and tsunami.[xii] The history of Lloyds is a fascinating one, and still evolving. Wherever there is risk and money to be made, you’ll find the name Lloyds.
Linda Collison is the author of Barbados Bound and Surgeon's Mate; the Patricia MacPherson Nautical Adventure Series (Fireship Press.) Read more on her website, lindacollison.com. Linda is one of the speakers at the 2012 Historical Novel Society Convention in London.
[vii] Worsley, Frank and Griffith, Glyn. The Romance of Lloyd’s; from coffee-house to palace. New York; Hillman-Curl Inc., 1937; pp.16, 99.
[viii] Worsely, pp 164-166.
[xi] Maffeo, Steven. Most Secret and Confidential; Intelligence in the Age of Nelson. London; Chatham, 2000, pp30-31.