Loyd's
Lloyds of London
Lloyd's of London is an internationally based insurance market leader and insurer. The company is the world's second largest insurer and sixth largest re-insurance group in the world. Lloyd's provides specialist insurance services to companies and organizations in 120 markets globally. The name is widely respected and well-known throughout the international business market community. Lloyd's has been in operation for over 300 years. The company has underwritten over 1688 ships and cargoes, 1887 non-marine risk ventures and issued the first motor policy in 1904 (Lloyd's, 2003). The company also underwrote many of the claims that were paid as a result of the San Francisco earthquake of 1906 (Lloyd's, 2003).
Lloyd's began as a coffeehouse, Edward Lloyd's coffeehouse, which bloomed into a marine insurance industry during the 17th century, and eventually expanded from shipping into other risk areas generally deemed untouchable by other insurance markets (Sapient, 2003). Lloyd's has developed a great deal of contacts and networking representatives over the years and established a solid reputation and security because of those relationships. The market Lloyd's provides has become so reliable that the British government in the height of its era has often relied on the market for economic and military intelligence in the past (Sapient, 2003).
Lloyd's of London has been deemed a "bona fide British institution," a marketplace where risk is mitigated via investors who underwrite risk in exchange for premium payments (Sapient, 2003). Lloyd's currently realizes multiple levels of revenue based on the various risk insurance and services it provides to its customers (Sapient, 2003). Though the market is not immune from fluctuations in the economy, such as the events that occurred following the attacks on the World Trade Centers, the market still has consistently managed to realize some profit and long-term security over the years. The companies accounting practices typically span a three-year cycle. This means that the method of accounting requires accounts to remain open for a period of 36 months, and premium income and claims are usually accounted for within the actual year a policy is issued (Lloyd's, 4792). The global assets for the company available to meet policyholder's claims for years 2001 and 2002 are defined in the chart below:
Cash and Investments
Reinsures share of technical provisions
Other assets
Total Assets
Total Liabilities
Net Resources
Source: http://www.lloyds.com/index/asp?ItemID=4792
Currently, Lloyd's holds approximately 5% of the world's re-insurance is placed at Lloyds. This 5% equates to half of London's international insurance market. Reinsurance is basically defined as insurance for insurance companies (ICMIF, 2003). Specifically, Lloyd's reinsures by distributing the risks and potential liabilities of other insurance companies onto itself. An original insured company distributes its risks to reduce the impact of a harsh claim. Reinsurance typically occurs in international business markets. Reinsurance does not guarantee a reduction in loss for the reinsured, but rather makes the impact of loss less damaging.
Lloyd's shares the risk of other insurance companies and enables clients to get coverage that any one company would not necessarily be able to assume. Lloyd's establishes contracts which insure companies against any risk they may incur by insuring someone else. Any international company that insures anything is inherently taking on risks. Lloyd's attempts to enable companies to minimize the impact of such risks.
Lloyd's business class ventures as of December 2002 included the following:
3% of business from Accident and Health
2% Motor third party liability
7% motor other classes
14% Marine, aviation and transport
22% Fire and other property damage
23% third party liability
25% reinsurance
3% other
Source: Lloyd's Market Reporting & Analysis, Lloyd's 2003
Lloyd's is also responsible for insuring some unusual risks. One such risk is lottery winnings. Currently employers can purchase insurance from Lloyd's that will protect them if employees in the UK were to win the lottery and walk out of their job (Lloyd's, 2003). Lloyd's also insures events including the Olympic Games, British and Commonwealth Games and World Soccer Championships (Lloyd's, 2003). Currently Lloyd's is looking into expanding into another unusual market - hacking. According to Lloyd's representatives, "hackers can cause millions of dollars worth of damage to businesses, and insurance companies have historically been unwilling to insure against those losses" (Enos, 2000). Lloyd's however, has recently partnered with a California based insurance company, Counterpane Security Inc., in an effort to provide insurance coverage for business losses that result from hacker "mischief" (Enos, 2000). The new insurance venture will protect companies from loss of revenues and loss of information assets which result from internet and e-commerce breaches (Enos, 2000). Lloyd's in this respect has become a pioneer of sorts, just another example of the constant desire for innovation within...
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