The origin of Lloyd's of London can be traced back to a coffee
house, which was started by Edward Lloyd during the 17th
century in London. Gradually it developed from a mere coffee
house into an important source of information for the businessmen
undertaking maritime trade. In course of time, Lloyd's took
shape as a result of the initiatives of several underwriters
and the sphere of activities expanded, which led to the
formation of Lloyd's as we know it today. Today, it is the
biggest insurance market known all over the world. This
article describes the historical evolution of Lloyd's. It
also briefly explains the present structure of Lloyd's.
Two phenomena were observed to persist almost at the same
time in 17th century England: A surge in the popularity
of coffee as a beverage and a growing demand for marine
insurance. This was an era which witnessed a rapid growth
in trade and maritime commerce. During this time, the coffee
houses, which had come up in various places, served as meeting
places for the merchants and provided a pleasant atmosphere
for carrying out business. Very soon these coffee houses
became popular in their new role. The Dutch dominated the
commercial scene during this time, and their main rival
were the English. Everyday ships arrived from suppliers
in various parts of the world with a profusion of products
that were either scarce before or were exotic luxuries that
were not known before. The chiefly traded commodities during
this time comprised of sugar and spices, coffee and tea,
raw cotton and fine silk, which used to come from far away
countries. Latest information which came from remote areas
of the world was now crucial for carrying out maritime trade,
and there was a great demand for information which would
be useful for estimating the sailing times between diverse
destinations, understanding the changing weather patterns,
and assessing the risks lurking in hitherto uncharted waters.
In the absence of any organized media for dissemination
of information, the coffee houses evolved as the important
sources of information.
Moreover, because of the myriad risks involved in carrying
out maritime trade, there was a growing demand for insurance
of the ships and cargo. The insurance business, in those
days, was carried out very informally and in an unorganized
way. A businessman who required insurance for a ship would
approach an intermediary known as `broker', who would arrange
for the appropriate type of insurance. The broker would,
in turn, approach other wealthy businessmen for getting
the necessary insurance cover, on behalf of his client.
Out of all the businessmen contacted by the broker, those
who would agree to provide the insurance cover would then
accept (or insure) a portion of the risk. This process would
continue until the risk was entirely covered.
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