17th century coffee shop to 21st century terror

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Lloyd's bids farewell to unlimited liability

Outlook

The world's oldest insurance market began in a City of London coffee shop belonging to Edward Lloyd. Mr Lloyd provided the premises and shipping news that his clientele used to insure vessels on their long trips across the world. The small market was well known by City entrepreneurs by 1688.

Those participating in the market would agree how much of the risk they wanted to cover and would sign their names one beneath the other on a document ­ coining their name as "underwriters".

The Lloyd's Act of 1871 put the society on a formal legal footing but it retained an air of gentlemanly capitalism. Cuthbert Heath, a famous underwriter, said after the 1906 San Francisco earthquake: "Pay all of our policies in full, irrespective of the terms."

But more recent questionable practices left Lloyd's in trouble. Some syndicates invested heavily in each other, sending a few toppling down when massive losses hit the market in the late 1980s, mainly from US asbestosis claims and natural disasters. Thousands of names were also bankrupted, leading to a decade of acrimonious legal battles with the Lloyd's central body.

Lloyd's now faces its largest ever one-off hit from the 11 September attacks, leading to fresh questions about whether it can survive in the ultra-competitive modern world of insurance.