Lloyd's of London

Hodgson, a British journalist, wrote a history of Lloyd's of London covering its origins in Edward Lloyd's coffee house, its development into the world's principal marine and specialty insurance market, its structure of individual Names bearing unlimited personal liability, and the scandals of the late 1970s and early 1980s.

The institutional material is what makes it useful. Lloyd's is a market rather than a company: underwriting syndicates operate within it, capital is supplied by Names who pledge their entire personal wealth against claims, and the market's reputation for paying claims is the asset that all the participants depend on. Hodgson explains the agency structure, the role of brokers, and the reinsurance arrangements including the reinsurance-to-close mechanism that transferred one year's remaining liabilities to the next.

The scandals he covers involved syndicate managers placing bad risks with Names they represented while protecting themselves and preferred clients, and the removal of funds through offshore reinsurance vehicles. Hodgson examines how the self-regulating structure permitted this and how the resulting inquiries changed governance.

The book was published in 1984, before the asbestos and pollution claims that nearly destroyed Lloyd's in the early 1990s, bankrupted thousands of Names and forced the introduction of corporate capital and the Equitas run-off vehicle. That is the most important thing that has happened to the institution and this book predates it entirely. Read it for the structure and the earlier history rather than as a current account.