The 'bubble Act' Of 1720 Restricted The Provision Of Insurance, Although The
The 'Bubble Act' of 1720 restricted the provision of insurance, although the King later granted charters to the Royal Exchange Assurance and the London Assurance Companies. However, this law was not aimed at the individual underwriters and wealthy merchants who had traditionally associated at Lloyd's Coffee Shop.
These merchants were therefore allowed to continue their underwriting activities without much competition from the newly - established companies which concentrated on fire business. With the increased standing of Lloyd's as a centre, brokers could always be sure of finding someone to write a risk, and, long before there was any formal association, the coffee house had become what Lloyd's still is today - a market place where a broker can place his risk without going outside one building.
During the eighteenth and nineteenth centuries, Lloyd's developed into a properly constituted society whose activities were based on the principles of insurance. The Lloyd's Act of 1873 put the Society on a formal legal basis and created the Company of Lloyd's. This has a self - regulatory role, and provides the members with various support services, but the principle of individual unlimited liability remains the same.
Lloyd's - The Lloyd's Market All risks at Lloyd's must be placed by insurance brokers. The underwriters have no direct contact with the client, and are dependent on brokers to obtain their premium income. There are around 270 accredited brokerage firms who are permitted to place risks in the Underwriting Room. The broker's duty is to arrange the best possible terms for his clients, and to this end he can place risks wherever he thinks appropriate, whether at Lloyd's, with insurance companies, or both.
When he receives a request for insurance cover, a Lloyd's broker will first make out the policy and the slip, which is a sheet of folded paper with details of the risk - what is to be insured, against what risks, the period of time, and any exceptions. The broker will then negotiate with a leading underwriter for that kind of risk, who may rate the risk, establishing a premium which other underwriters will follow. The leading underwriter will accept a percentage of the risk on behalf of his syndicate, and this proportion is called a queue. The risk is spread as widely as possible to allow the market to withstand the pressure of heavy claims.
The broker contacts other syndicates until the total percentage of the risk is subscribed. When an underwriter agrees to accept the risk he initials the slip, and in so doing he gives legal evidence of the agreement to insure, which is binding on the Names in his syndicate.