Lloyd’s Coffeehouse: Birthplace of the Insurance Industry as we know it

Wed, May 20th 2009, 12:37

In the late 1600s, Edward Lloyd’s coffeehouse on the banks of the Thames River in London was a popular meeting place for people in the shipping industry, traders, sailors and ship-owners.


Edward Lloyd went out of his way to attract shipping people to his coffee house. He had his finger on the pulse of shipping news and his shop provided the perfect space for shipping men to talk business and make arrangements for shipping expeditions.

Investing in a shipping expedition has always been a risky business: there is no guarantee that the ships will arrive back in one piece with its goods intact. Since merchants first took to the seas to buy and sell goods there have been arrangements in place to deal with the risk of loss. As far back as Babylonian times, merchants would pay a premium to investors funding their trading expeditions. This was in exchange for an agreement to cancel the loan if the ship returned without its shipment.

At Lloyd's coffee house, deals were transacted to share the risk of a shipping expedition. Each person would sign their name at the bottom of the marine insurance agreement indicating the amount of risk that they agreed to cover. This is the origin of the word "underwriting".

Lloyd's became the centre for transacting marine insurance in London. This continued after Edward Lloyd's death in 1713 and eventually became formalised into the unique organisation known as Lloyd's of London, now the world's second largest commercial insurer.

Lloyds of London is not a company, but a society of individuals and corporations who agree to spread an insurance risk between them. Each member will take responsibility for a share of a particular insurance risk. Lloyd's of London is a specialist insurer; its members provide insurance cover for all sorts of risks. And in its long history, Lloyd's can boast that it has never failed to pay out an insurance claim.

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