Arguably, the most important factor in the development of insurance archaeology within the London Insurance Market was the discovery in the early 1980s that the London Market and most particularly insurance brokers licensed by Lloyd’s, known as Lloyd’s Brokers, had retained a consistent record of their placements for their North American clients and policyholders.
This record has proved to be doubly valuable because, besides documenting the London Market insurance, it provided evidence of underlying insurance, usually the U.S. primary coverage. Considering the foregoing, it is not surprising that in the course of the last 35 years I have had occasion to work for many clients who bought insurance coverage from the London Market.
In order to place insurance at Lloyd’s, a firm (or individual) must be an authorized by Lloyd’s itself, a Lloyd’s Broker. As this relates to work historically undertaken by R.M. Fields, it transpired that for all the programs worked on where the London Market was involved, there would be an opportunity, by recourse to the records of a Lloyd’s Broker, to unearth responsive insurance for our clients.
There are other sources within the London Market where evidence of historical coverage can also be found. These sources include certain London Market Insurance Companies, Claims Service Companies and the Underwriting Syndicates themselves but in my experience, the most accessible and abundant records are found in the archives of the Lloyd’s Brokers.
Besides this work, I would also be in regular contact with Lloyd’s Brokers and have learned, for example, which brokers retained the most complete records. As my career at Fields evolved, coinciding with the development of insurance coverage litigation in the United States, the work we undertook for our clients with London Market coverage also changed. One example of this is that from the 1990s forward, in our client reporting it became necessary to identify each syndicate and company and the percentage line they took. If the policy is available this is relatively straightforward. Without a policy, it can be difficult and time consuming.
My experience with the London Insurance Market is not as an underwriter or a broker or a claims handler or other insurance intermediary. The connection I have is through my work as an insurance archaeologist. Since we are typically tasked with the location, reconstruction and analysis or audit of evidence of insurance coverage provided by Syndicates at Lloyd’s and/or London Market Insurance Companies, in order to accomplish our objectives, an all-round knowledge of the workings of the market is vital.
To locate evidence of coverage, besides from within our client’s own files, we must be able to identify the custodians of pertinent records within the London Market. This entails at least two key elements; (1) knowledge of historical insurance markets and relationships and (2) considering the recent and continued consolidation in the insurance industry world, an ability to identify current entities and their historical predecessors.
To reconstruct the coverage, we must know what constitutes a pertinent record and what elements comprise a complete London Market policy. To successfully analyze recovered information we must be able to provide our clients and their professional advisors with clear and concise reports in which, for example, taking account the claims at issue, we isolate and extract relevant policy terms and conditions and identify, as completely as possible, details of the market participants.
Early on in my career with Fields, I was part of a team processing documents recovered on behalf of clients who had bought insurance in the London Market. As a result, I gained experience reviewing and extracting salient coverage data from Lloyd’s and London Market Company Group’s (such as the Institute of London Underwriters) policies and on occasion individual London Market Company policy evidence. I also routinely reviewed broker’s slips, cover notes, and broker’s placing or underwriting files which together with associated research provided an understanding of how the market works.
The Underwriting and production of a London Insurance Market Policy – A Brief Guide
- When investigating an insurance program that includes London market participation, one of the first things that should be understood is that Lloyd’s is not an insurance company, rather it is a marketplace where the business of insurance is transacted.
- A London Market policy is typically underwritten by multiple entities which collectively insure one hundred percent of a given piece of insurance. These entities may be in the form of Syndicates – groups of individuals or “names” on whose behalf insurances are accepted from insurance brokers who are acting on behalf of prospective policyholders – and/or London Market insurance companies.
- To affect a London Market Policy, simply stated, a document or “placing slip”, is prepared by the Lloyd’s Broker that contains a summary of the terms of a proposed insurance contract. It is presented by the Broker to selected Underwriters for their consideration. Underwriters may delete, amend or add terms on a slip as they consider appropriate and ultimately will signify their acceptance by initialling the slip and indicating the share of the insurance that they will take.
- The Underwriter who first accepts a share of the insurance is known as the Leading Underwriter or sometimes the Leader. Once the Leader (which can also be a Company) has signed, the broker will identify other syndicates and/or companies – the “following market”, that he believes will take a percentage line on the risk being presented. In this way he can generally fill a hundred percent of the risk being presented. The process continues with the preparation of a “signing slip” which is the document used for submitting the details of the insurance to the Lloyd’s Policy Signing Office and ultimately leads to the preparation and issuance of the Policy itself. This is not an overnight process and frequently takes months or even a year or more to complete. Pending receipt of the actual policy the policyholder may get a cover note (an interim document which evidences the grant of coverage), usually from the US broker who is working with the Lloyd’s Broker. Based on my experience, it is clear that the policyholder frequently never received the London Market policy.
- In my experience, which is largely concerned with North American casualty risks, I have found that the older the insurance is, the greater the share of the security underpinning the limits of liability of any given insurance that is written in a Syndicate Market. At times, Companies may only have been used where the broker was unable to complete the order with Syndicates. Generally, as time went on the proportion of syndicates to companies became more balanced. In the 1970s, you might find a London Market policy where the larger share or even all of the security underpinning the insurance was written in a company market.
