A FAST-PACED, INSIDER ACCOUNT OF THE NEAR- RUIN AND AMAZING RECOVERY OF THE WORLD’S OLDEST AND LARGEST INSURANCE MARKET

ON THE BRINK:

HOW A CRISIS TRANSFORMED

LLOYD’S OF LONDON

By Andrew Duguid

This is the story of how huge losses very nearly destroyed the

world’s oldest and largest insurance market. Thousands of

members were trapped, often facing unaffordable bills of a million

pounds or more. This led to agony, outrage and self-help. New leaders

emerged, formed action groups and sought justice from the courts.

A complacent institution was forced to think again, repair some of the

damage and re-invent itself. To confront its biggest crisis ever, Lloyd’s

found inspirational leaders, hidden talents among its members and

hired formidable experts. At times the financial chasm looked too

wide, the breakdown of trust too deep, to be crossed.

How could this happen after ten years of reform? What were the

causes of these huge losses? Was the disaster the result of fraud,

incompetence or just bad luck? Could a way be found to meet the

debts, renew the capital, restore enough trust to strike a deal and

rescue the hardest hit? Could this be done within the constraints

of the strict law governing insurance, in Britain and the US, and a

highly competitive international marketplace? The response had

to win over the members, while retaining the confidence of

regulators and customers. It had also to attract investors and

retain market professionals, many of whom had tempting

opportunities elsewhere. It was a Rubik’s cube with little

scope for trial and error.

This book tells what really happened,

from the inside.

Publishing August 2014 | 9781137299291 £24.99 | $39.99 I $45.99 CAN Hardback I 234x156mm I 352pp

EXTRACT #1 - ‘PREFACE’

DID YOU KNOW? The current Lloyd’s building was designed by Richard Rogers and took eight years to build. It is nicknamed the ‘Inside-Out’ building.

DID YOU KNOW? The Lutine Bell, which hangs in the Underwriting Room, is synonymous with Lloyd’s. Traditionally it has been rung to herald important announcements – one stroke for bad news and two for good. Today the ringing is generally limited to ceremonial occasions.

DID YOU KNOW?

Lloyd’s began life as a 17th Century coffee

house. Started by Edward Lloyd, the

establishment became recognised as the

place to go for marine information and soon

for insurance too.

P R O F E S S I O N A L F I N A N C E Learn more at www.palgrave.com/professionalfinance

When George Pataki was elected as the Republican Governor of New

York State, he made many fresh appointments. He knew exactly

who he wanted to put in charge of the NY Insurance Department, as

Superintendent. A few years previously, Ed Muhl had proved a popular

and capable Insurance Commissioner for the state of Maryland. His

fellow regulators had elected him president of the National Association

of Insurance Commissioners.

The first day he took up the job, Muhl called the senior staff together...

He explained that there were going to be some changes in the way the

Department was run... At the end of his speech he asked if there was

anything significant he needed to know about? Was there anything

important that needed to be signed? Muhl says “I should never have

asked the question because a young lady from the legal department

raised her hands, and said ‘you probably ought to know about this,

Superintendent.’ She handed me a report on the Lloyd’s of London

US trust fund, saying ‘Lloyd’s is insolvent. We need to de-accredit

Lloyd’s in the US as a surplus lines writer and as an accredited

reinsurer.’ There was probably a very loud sound when my jaw

dropped and hit the desk.”

EXTRACT #2 - ‘VIEW FROM NEW YORK’

EXTRACT #3

BREAKING THE MOULD

On Friday afternoon, Peter Middleton stood up to discuss his approach

to a new settlement. It was nearly 12 months since the failure of the

first offer. Middleton had no notes, no slides, nothing to indicate any

preparation. He had been talking to action group chiefs, notably their

newly-established leader Michael Deeny: he knew much more about

their attitudes than anyone else in the room. Deeny’s hand had been

strengthened by his recent massive legal victory. Names had just won a

key legal decision in the Clementson and Mason cases, meaning it could

take at least another year before Lloyd’s could resume debt recovery

proceedings. Others still regarded action group leaders as traitors.

After a few minutes, Middleton dropped a bomb. The only way there

could be a settlement was to cap Names’ liabilities and write off some

of the debts from people who were not willing to pay, as well as from

those unable to pay. The two deputy chairmen, Hiscox and Stace,

were outraged. For them, it was unthinkable to let “won’t pays” off so

lightly. After only a brief discussion, Middleton announced that he had

a private engagement and left the whole gathering. In his absence, he

received much criticism that evening; gloom descended as the meeting

finished earlier than planned on Saturday morning. The general view

was that Middleton had become over influenced by the action group

leaders. In short he had gone native.

DID YOU KNOW? Lloyd’s has hit the headlines for insuring the weird and wonderful body parts of celebrities. Some examples include Tina turner’s legs, Keith Richards’s hands and Egon Ronay’s taste buds!