Wrecks, fires and lawsuits
At one end of the cavernous "room," as the main trading hall of Lloyd's of London is called, a clerk still enters (with a quill pen) the names of newly sunk vessels in an upright ledger that, in past years, has held the names of the Titanic and the Lusitania. Above hangs the Lutine bell, salvaged from a Lloyd's-insured British frigate, which tolls to announce a maritime loss or other disaster. That bell should perhaps now be pealing for the venerable insurance institution itself.
In the exchange's 293-year history, the members of the 403 separate risk-taking Lloyd's syndicates have insured countless ships and just about everything else from satellites to the Loch Ness monster and Betty Grable's legs. They even underwrote for $1 million the bust of a San Francisco striptease dancer billed as "Treasure Chest West."
But the institution, founded in a London coffee shop owned by Edward Lloyd in 1687, will need all its ingenuity and eye for new business to face its current problems. Lloyd's is hurting financially because of some staggering insurance claims, and is torn by a bitter in-house lawsuit. Because of the strife, Lloyd's new chairman, Peter Green, 55, told TIME that he now intends to ask the British Parliament this year to pass a new act governing the insurance exchange. This would be the first significant new legislation covering Lloyd's since 1871.
The rush to change Lloyd's ways stems largely from the hard times some of the syndicates making up the insurance exchange suddenly face. Although professional underwriters on the trading-room floor assess the risks and set policy premiums, all profits and losses are shared evenly through the syndicate, much as in a partnership. These groups range in size from 20 to 1,000 members, most of whom are nonprofessional investors known as "names."
Until recently, syndicates' profits were traditionally high. In 1976 the 8,565 members shared a premium income of $281 million. Since then, the ranks have swelled to 18,500, and the profits of most syndicates have declined. The names now include everyone from titled British aristocracy to the Pink Floyd rock group, some 1,191 Americans and 36 Arabs. The basic rule is the same for all: members share in the syndicate's profits in good years but in bad years must also divide losses, no matter how large.
Now that Lloyd's fat years have been followed by a lean period, this unlimited liability rule and a string of heavy claims threaten the members of some syndicates with personal bankruptcy. Losses totaling about $340 million have been incurred from insuring U.S. computer-lease contracts that were prematurely canceled when IBM came out with a better machine. Furthermore, last year a disastrous 2.3 million tons of shipping were lost—including what may become the biggest marine claim ever, the sinking in the Caribbean in July of a 293,000-ton oil tanker, the Atlantic Empress. In addition, members face potential claims of $75 million from RCA for a communications satellite lost in space and perhaps a further $75 million from NBC if the network ends up not televising the Moscow Olympics because of the U.S. boycott.