World's biggest insurer takes on all risks
all started over coffee.
Three centuries ago, merchants anxious to avoid
financial disaster if their ships literally failed to come in met at Edward
Lloyd's coffeehouse in London to insure their vessels and cargoes.
Today, Lloyd's of London is the world's biggest
insurance market, but maintains a tie to its humble past. It's housed in a shining
metallic building some say resembles a coffee percolator.
Its business has changed since 1688. It no
longer deals with just ships and the sea, but with space stations, circus elephants,
Bruce Springsteen's voice (for $5.6 million), the Loch Ness monster, the Olympic
Games, earthquakes in Turkey and terrorist attacks.
Lloyd's covers everything, from Everest expeditions
to the top of the world, to the foot of Miss Liberty. They have paid out for
natural disasters, shipwrecks like the Titanic and the tragedy of the World
Trade Center's fallen twin towers.
Who is Lloyd's anyway?
Its nine syndicates of insurance brokers are all sole traders, called Names.
They gamble with their own capital, and are responsible for their own share
of profits and losses "down to the last shirt button."
"Not even death ends the unlimited liability
of a Name," says Lloyd's broker and mini-Name Edward Patrick-Roberts cheerfully.
"There are 2,800 Names, most of whom are wealthy, but not
all are," he explains. "There are a couple of Royals -- Princess Alexander
and Princess Michael of Kent, a dozen dukes and earls, a few dozen peers. There
are actors, tennis players, publishers and racecar drivers. Names also include
about 60 Members of Parliament, including former Prime Minister, Edward Heath.
"As well as the Names, there are more than 34,000 members
who also underwrite risks and for the past 30 years, a mini-Name has only had
to show about $60,000 in assets, depositing one-third of that at Lloyd's.
"It's not just for the rich and famous any more," Patrick-Roberts
Exotic and bizarre
But the rich and famous go to Lloyd's for their insurance. Some of it is mundane,
some of it exotic, some bizarre.
"Cutty Sark, the Scotch whisky company, offered a reward
of a million British pounds -- about $1.55 million -- to anyone who could capture
Nessie, the Loch Ness monster, alive," says Patrick-Roberts, who lives
in Scotland. "We at Lloyd's took on the policy to cover Cutty's liability
if they have to pay up."
It isn't their most bizarre risk, though. The company covers 100,000
Americans against kidnap by space aliens, with double payment if the kidnap
victim is impregnated by the extraterrestrials. Wine tasters insure their palates
and 20 members of a "Whiskers' Club" once insured their beards against
fire or theft.
The policies of performers are well known. Bruce Springsteen insured
his voice for $5.6 million, Angie Dickinson and Jamie Lee Curtis each valued
their legs at $1 million. The late great ballet dancer Rudolf Nureyev insured
his legs, too: for a then-considerable $304,000.
"We even paid out $100,000 on a life policy James Dean took
out one week before his tragic death at age 25," Patrick-Roberts says.
Fashion model Petra Morgan pays $86,000 a year in premiums to
insure her breasts. If they are accidentally injured or disfigured, and end
her career, her treasure chest will be worth $16 million, earning her a spot
in the Guiness Book of World Records for having the world's most expensive body
They cover themselves
Underwriters do investigate their risks, said Patrick-Roberts. "When a
20-year-old merchant marine sailor wanted to float from England to France in
his bath tub, the underwriter took on the $145,000 risk only after inspecting
the tub and getting agreement that the drain plug would stay in place at all
Companies routinely insure themselves against the chance of employees
hitting big lottery jackpots and walking out, leaving the firm without a staff.
"The usual terms are that a lottery syndicate must win more
than $155,000 and the employees must resign within 14 days," said Patrick-Roberts.
Employers can claim up to $750,000 to cover the costs of finding and hiring
Nevada broker Phillip Perry, who handles corporate business for
Lloyd's, says that Lloyd's also insures the U.S. Army against having any of
its international bases attacked by terrorists. U.S. insurers were reluctant
to take on the risk, which covers about a dozen bases.
"We insure only the buildings, but not military equipment
or loss of life," Perry says, "and we insure against attacks that
exclude chemical or nuclear bombs."
Until the terrorist attacks of Sept. 11, 2001, such cover was
virtually free, because the risk was deemed so low. But Lloyd's, who insured
the World Trade Center, lost nearly $3 billion in the attack, and have had to
look again at the possibilities.
For what the bell tolls
It's traditional at Lloyd's to sound the bell of the sunken vessel Tontine before
important news is announced -- one chime for disaster, two for good news.
The bell tolled for the Titanic, for the World Trade Center and
for the loss of the space shuttles.
It resonated often for major setbacks in the 1980s as Lloyd's
lost $12 billion to hurricanes, earthquakes and claims for asbestos-related
deaths. Other giant payouts that nearly scuttled the consortium were a North
Sea oil rig explosion and the Exxon Valdez oil spill disaster.
But some policies seem unlikely to bankrupt anyone.
"We do have a few policies insuring the mythical unicorn
against death or disease," says Patrick-Roberts. "We insure garden
gnomes against theft or kidnap, brides against wedding cancellations, and a
grain of rice with the Queen's portrait engraved on it against theft or accidental
"We can insure pretty much anything," says Perry. "It's
just about how much people are willing to pay."
A lot of the wackiest policies are bought as a gag gift. Patrick-Roberts
says some 40,000 people have insured against their homes being haunted by ghosts;
another 250,000 are covered against a Yeti or Bigfoot attack and 60,000 people
have taken out policies against being turned into a vampire or werewolf.
A race track in England paid about $400 to insure all race goers
against being kidnapped by spacemen and having microchips implanted.
"The publicity alone was worth a fortune," laughs Perry.
Paul Bannister is a freelance writer based in
-- Posted: Sept. 23, 2003