Lloyds Market

In the London market a broker seeking to place insurance will probably deal partly with Lloyds and partly with the insurance companies belonging to the Institute of London Underwriters.  The Lloyds Market comprises a large number of individuals, or “names”, each prepared to risk their personal fortunes as insurance underwriters.  The names are organised into underwriting syndicates who appoint professional managing agents operating from a series of railed-off wooden boxes situated on the floor of the Lloyds Building in the City of London. The Institute of London Underwriters (ILU) comprises the various commercial insurance companies and has premises situated conveniently in Leadenhall Street, a few doors away from Lloyds of London. The broker who wishes to place insurance would approach perhaps four leading Lloyd’s underwriting syndicates and companies individually, armed with full particulars of the risk to be placed, that is information about the ships, the values, management and previous insurance claims record.  As with all insurance, the doctrine of Utmost Good Faith applies in the Marine market.  A full disclosure of all relevant facts is, therefore, essential, or the Policy becomes voidable, which means that the Underwriters can at any time and in their option “void” the Contract of Insurance.  This could be disastrous for a ship owner especially as he could be faced with a major casualty with no insurance cover. The broker negotiates with the leading underwriters for the cover to be placed and once all is agreed, the leading underwriters will take a small percentage of the risk; thereafter  the broker then needs to “complete” the insurance by obtaining following “lines” from other insurers, either additional Lloyds Syndicates or ILU companies.  Each line will comprise of a few percentage points of the total risk so that the maximum spread is achieved. Outside the London Market a broadly similar procedure applies, although particularly in Scandinavia much hull insurance is arranged with mutual associations.