1 00:00:17,560 --> 00:00:19,040 Speaker 1: Pushkin too quick. 2 00:00:19,240 --> 00:00:33,159 Speaker 2: No, it's perfect push kit stop, you got it. 3 00:00:35,360 --> 00:00:38,800 Speaker 3: Starting this one with a headline from the Onion. 4 00:00:38,960 --> 00:00:41,000 Speaker 1: I'm surprised it's taken us this long to start with 5 00:00:41,000 --> 00:00:42,239 Speaker 1: an Onion headline. 6 00:00:41,960 --> 00:00:46,199 Speaker 3: Supposedly from the day after the Titanic sank, and the headline. 7 00:00:45,720 --> 00:00:52,200 Speaker 1: Is world's largest metaphor. Hits Iceberg always left that one. 8 00:00:52,240 --> 00:00:52,680 Speaker 1: It's good. 9 00:00:52,720 --> 00:00:55,680 Speaker 3: It's good, and I thought of it when I was 10 00:00:55,720 --> 00:00:58,760 Speaker 3: working on this show on part two of our story 11 00:00:58,760 --> 00:01:02,480 Speaker 3: about Lloyd's of London, so I looked it up and 12 00:01:02,560 --> 00:01:05,640 Speaker 3: I didn't remember the subhead, which is also genius, which 13 00:01:05,720 --> 00:01:11,240 Speaker 3: is Titanic representation of Man's Hubris sinks in North Atlantic. 14 00:01:12,759 --> 00:01:15,560 Speaker 3: I'm dredging up this bit of gen x nostalgia, and 15 00:01:15,600 --> 00:01:18,120 Speaker 3: not just because I think it will be red meat 16 00:01:18,160 --> 00:01:20,520 Speaker 3: for our listeners, though I do, but also because I 17 00:01:20,560 --> 00:01:23,800 Speaker 3: think it is the perfect place to start the story 18 00:01:23,800 --> 00:01:26,760 Speaker 3: of Lloyd's of London in the twentieth century. Because the 19 00:01:26,800 --> 00:01:31,720 Speaker 3: Titanic sailed in April of nineteen twelve, it was insured 20 00:01:32,080 --> 00:01:33,840 Speaker 3: by multiple Lloyds underwriters. 21 00:01:34,040 --> 00:01:35,440 Speaker 1: Of course it was, of course it was. 22 00:01:36,280 --> 00:01:39,920 Speaker 3: The insurance was cheap because the Titanic was unsinkable, and 23 00:01:39,959 --> 00:01:43,399 Speaker 3: then as we all know the Titanic sank and the 24 00:01:43,440 --> 00:01:47,360 Speaker 3: insurance that Lloyd's paid up in full within thirty days. 25 00:01:48,240 --> 00:01:52,560 Speaker 3: And yes, the Titanic is a metaphor for Lloyd's. In 26 00:01:52,600 --> 00:01:57,080 Speaker 3: the twentieth century, Lloyd's was the finest insurance market on 27 00:01:57,160 --> 00:02:02,160 Speaker 3: the seas, seemed unsinkable until it hit an iceberg. An 28 00:02:02,160 --> 00:02:06,640 Speaker 3: iceberg made of hubris and lined with asbestos. Not a 29 00:02:06,640 --> 00:02:09,400 Speaker 3: great metaphor, it's good, but I'm going down with the 30 00:02:09,440 --> 00:02:10,640 Speaker 3: ship of my metaphor. 31 00:02:10,720 --> 00:02:13,919 Speaker 1: I'm Jacob Goldstein Lbert Smith, and this is business history 32 00:02:13,959 --> 00:02:14,880 Speaker 1: to show about the history. 33 00:02:14,760 --> 00:02:18,320 Speaker 3: Business and the history of insurance. We're starting with Lloyd's 34 00:02:19,280 --> 00:02:22,520 Speaker 3: at the top of its game to the nineteen eighties. 35 00:02:23,240 --> 00:02:26,160 Speaker 3: And to be an underwriter at Lloyd's is to live 36 00:02:26,360 --> 00:02:31,600 Speaker 3: the dream, at least to live the insurance underwriting dream. Remember, 37 00:02:31,600 --> 00:02:34,640 Speaker 3: the underwriters don't work for Lloyd's. Lloyd's is a marketplace. 38 00:02:34,680 --> 00:02:39,239 Speaker 3: They work at Lloyd's. They write insurance policies, they collect premiums, 39 00:02:39,280 --> 00:02:42,440 Speaker 3: they pay claims, but at Lloyd's they do it with style. 40 00:02:42,800 --> 00:02:47,080 Speaker 3: There's this description of underwriters at Lloyd's from around this 41 00:02:47,160 --> 00:02:49,400 Speaker 3: time that I love and that I want you to read. 42 00:02:50,160 --> 00:02:54,640 Speaker 1: Many leading underwriters have presence. They wear a rose in 43 00:02:54,680 --> 00:02:58,520 Speaker 1: their buttonhole, make an entrance fashionably late, shoot a couple 44 00:02:58,560 --> 00:03:03,000 Speaker 1: inches of white poplin cuff displaying gold links, unscrew the 45 00:03:03,000 --> 00:03:06,960 Speaker 1: top of a gold fountain pen, and scribble their initials 46 00:03:07,360 --> 00:03:09,600 Speaker 1: with a stagy flourish. 47 00:03:09,880 --> 00:03:12,960 Speaker 3: That scribble, by the way, that is the actual underwriting 48 00:03:13,120 --> 00:03:15,639 Speaker 3: that has been going on at Lloyd's for about three 49 00:03:15,680 --> 00:03:18,680 Speaker 3: hundred years at this point. And that description comes from 50 00:03:18,680 --> 00:03:22,920 Speaker 3: a book called Lloyd's A Reputation at Risk by Godfrey Hodgson, 51 00:03:23,080 --> 00:03:25,960 Speaker 3: published in nineteen eighty four. And I want you, Robert, 52 00:03:25,960 --> 00:03:28,919 Speaker 3: to read just a little more of that passage about underwriters. 53 00:03:29,240 --> 00:03:31,480 Speaker 1: There are plenty of these leading men at Lloyd's, even 54 00:03:31,520 --> 00:03:36,320 Speaker 1: a few stars. Ian Posgate is the only superstar. They 55 00:03:36,320 --> 00:03:42,000 Speaker 1: call him Goldfinger in the market. He positively seeks out 56 00:03:42,080 --> 00:03:45,320 Speaker 1: dangerous business, whereas competitors are nervous because there have been 57 00:03:45,360 --> 00:03:54,040 Speaker 1: heavy losses. War hijacking, political upheaval, catastrophe have been his opportunities. Goldfinger. 58 00:03:54,280 --> 00:03:58,080 Speaker 3: Goldfinger apparently got his start writing insurance on ships going 59 00:03:58,160 --> 00:04:00,200 Speaker 3: up the Mekong during the Vietnam War. 60 00:04:00,720 --> 00:04:03,200 Speaker 1: What I love about this is he does sit at 61 00:04:03,200 --> 00:04:07,600 Speaker 1: a desk in a room in London, but he's so 62 00:04:08,160 --> 00:04:13,040 Speaker 1: edgy because of the policies he writes. The other insurance 63 00:04:13,080 --> 00:04:15,400 Speaker 1: agents are like that guy gold Fan. 64 00:04:15,560 --> 00:04:17,439 Speaker 3: I mean he is also one of the highest paid 65 00:04:17,480 --> 00:04:21,159 Speaker 3: men in England at this point, so you know, yes. 66 00:04:20,880 --> 00:04:24,480 Speaker 1: Because he uses his finger to sign a name which 67 00:04:24,520 --> 00:04:25,599 Speaker 1: is worth its weight in gold. 68 00:04:26,039 --> 00:04:29,400 Speaker 3: And so still at this point Lloyd's is obviously not 69 00:04:29,440 --> 00:04:30,600 Speaker 3: a coffee house anymore. 70 00:04:31,160 --> 00:04:31,920 Speaker 1: But there is. 71 00:04:32,000 --> 00:04:35,040 Speaker 3: One room where Posgate, the old Finger and the other 72 00:04:35,120 --> 00:04:38,200 Speaker 3: underwriters work and it's called the Room with a capital 73 00:04:38,360 --> 00:04:40,919 Speaker 3: R because it's Lloyd's and they love to capitalize things. 74 00:04:41,760 --> 00:04:43,760 Speaker 3: And I should say, just structurally at this point that 75 00:04:44,240 --> 00:04:47,240 Speaker 3: underwriters aren't like loan guns anymore. You know, it's not 76 00:04:47,320 --> 00:04:50,160 Speaker 3: just like some guy. There are these companies called managing 77 00:04:50,279 --> 00:04:54,599 Speaker 3: agents that are kind of doing the insurance business. But 78 00:04:54,720 --> 00:04:58,680 Speaker 3: star underwriters are still stars. And you can think of 79 00:04:58,839 --> 00:05:02,880 Speaker 3: the room as like kind of like a farmer's market, 80 00:05:02,920 --> 00:05:05,640 Speaker 3: you know, or like a food market you might visit 81 00:05:05,680 --> 00:05:09,240 Speaker 3: where there's you know, different stalls and somebody selling vegetables 82 00:05:09,240 --> 00:05:11,280 Speaker 3: and somebody's selling chicken at one or whatever. 83 00:05:11,560 --> 00:05:12,599 Speaker 1: Go chi guy in the corner. 84 00:05:12,680 --> 00:05:14,359 Speaker 3: Yeah, there's a goa cheese guy in the corner. But 85 00:05:14,560 --> 00:05:16,640 Speaker 3: instead of that, it's like there's a guy in this 86 00:05:16,760 --> 00:05:19,320 Speaker 3: box selling kidnapping insurance, and there's a guy in this 87 00:05:19,360 --> 00:05:22,200 Speaker 3: box selling marine insurance and whatever. And they still have 88 00:05:22,240 --> 00:05:24,479 Speaker 3: the loutene bell that we talked about last time, that 89 00:05:24,520 --> 00:05:26,520 Speaker 3: bell that got dredged up, that's still in the middle 90 00:05:26,520 --> 00:05:30,200 Speaker 3: of the room, mostly ceremonial at this point, and still 91 00:05:30,320 --> 00:05:33,800 Speaker 3: each underwriter has, you know, a little stall, a bench, 92 00:05:33,960 --> 00:05:36,520 Speaker 3: a phone. Computers are just starting to get there in 93 00:05:36,520 --> 00:05:39,960 Speaker 3: the eighties, and the brokers, the people who are there 94 00:05:40,000 --> 00:05:43,919 Speaker 3: to buy insurance, still go from box to box, just 95 00:05:43,960 --> 00:05:45,839 Speaker 3: like they used to go from table to table hundreds 96 00:05:45,880 --> 00:05:50,240 Speaker 3: of years earlier, talking to different underwriters looking for insurance. 97 00:05:50,960 --> 00:05:53,040 Speaker 3: And in that book you were reading from, there is 98 00:05:53,120 --> 00:05:56,240 Speaker 3: this amazing scene where the writer describes just a few 99 00:05:56,320 --> 00:06:00,440 Speaker 3: hours one day at Posgate's box at Goldfingers, you know 100 00:06:00,960 --> 00:06:02,000 Speaker 3: box in the room. 101 00:06:02,400 --> 00:06:04,960 Speaker 1: I can imagine, you know, when you have a policy, 102 00:06:05,080 --> 00:06:08,360 Speaker 1: something so strange, so dangerous, you present it to someone 103 00:06:08,360 --> 00:06:10,960 Speaker 1: in the room and he just points over. 104 00:06:11,400 --> 00:06:17,360 Speaker 3: Goldfinger So here's a list. It is amazingly heterogeneous, varied. 105 00:06:18,000 --> 00:06:21,440 Speaker 3: The people are looking for insurance on a Swedish cargo ship, 106 00:06:22,000 --> 00:06:25,680 Speaker 3: a mansion in London, owned by an investment firm in Zurich, 107 00:06:26,480 --> 00:06:29,000 Speaker 3: part of the risk on an oil drilling platform in 108 00:06:29,080 --> 00:06:33,000 Speaker 3: the North Sea. A policy covering a construction company against 109 00:06:33,000 --> 00:06:37,880 Speaker 3: the risk of confiscation and expropriation of their plant in Indonesia, 110 00:06:38,320 --> 00:06:39,680 Speaker 3: racehorses in Tennessee. 111 00:06:39,960 --> 00:06:42,479 Speaker 1: It's almost starting to seem a little dodgy, some of 112 00:06:42,520 --> 00:06:45,440 Speaker 1: these things they're ensuring shell companies are involved. 113 00:06:45,520 --> 00:06:48,599 Speaker 3: Yeah, well, I will say it came out later that 114 00:06:48,720 --> 00:06:53,640 Speaker 3: Posgate himself was at least somewhat corrupt. He was tried 115 00:06:53,680 --> 00:06:56,359 Speaker 3: for fraud after millions of dollars in premiums that he 116 00:06:56,400 --> 00:07:00,039 Speaker 3: was responsible for disappeared. He was acquitted, but he did 117 00:07:00,080 --> 00:07:03,040 Speaker 3: admit to accepting a Pizarro painting in some kind of 118 00:07:03,120 --> 00:07:06,560 Speaker 3: shady deal, and he was pushed out of Lloyd's. And 119 00:07:06,600 --> 00:07:12,000 Speaker 3: so that really was Lloyd's by the nineteen eighties, insidary, corrupt, 120 00:07:12,920 --> 00:07:17,480 Speaker 3: but also still glamorous, weirdly glamorous for insurance. 121 00:07:17,640 --> 00:07:20,200 Speaker 1: Well, you may remember in the nineteen eighties, like Lloyd's 122 00:07:20,240 --> 00:07:23,360 Speaker 1: was one of those jokes that everyone could make. You know, 123 00:07:23,400 --> 00:07:26,000 Speaker 1: if you were good at, say talking on the radio, 124 00:07:26,120 --> 00:07:28,760 Speaker 1: you would joke, oh, well, Lloyd's has insured my my 125 00:07:28,840 --> 00:07:33,040 Speaker 1: dulcet Tones would laugh because it was both a joke 126 00:07:33,120 --> 00:07:35,480 Speaker 1: but it was also a huge status thing to be 127 00:07:35,520 --> 00:07:38,320 Speaker 1: insured by Lloyd's. Says, you were at the top of 128 00:07:38,360 --> 00:07:38,760 Speaker 1: your game. 129 00:07:39,200 --> 00:07:44,480 Speaker 3: Yes, Lloyd's in fact insured Bruce Springsteen's voice, and they 130 00:07:44,520 --> 00:07:49,240 Speaker 3: insured racehorses, and they ensured satellites. They actually paid for 131 00:07:49,280 --> 00:07:53,000 Speaker 3: the first ever satellite salvage mission in nineteen eighty four. 132 00:07:53,040 --> 00:07:54,720 Speaker 3: They'd been paying for ship salvage missions. 133 00:07:54,760 --> 00:07:57,600 Speaker 1: Yea hundred. I love that satellite is the modern day ship, 134 00:07:57,640 --> 00:08:00,200 Speaker 1: but of course it is. It is a space ship. 135 00:08:00,640 --> 00:08:03,560 Speaker 3: So in fact, in the eighties, Lloyd's paid for astronauts 136 00:08:03,600 --> 00:08:06,600 Speaker 3: on the Space Shuttle to go collect a couple satellites 137 00:08:06,640 --> 00:08:09,080 Speaker 3: that Lloyd's had insured and that like didn't make it 138 00:08:09,120 --> 00:08:12,640 Speaker 3: to the correct orbit. And in fact, when the astronauts 139 00:08:12,720 --> 00:08:16,720 Speaker 3: came back, President Reagan gave the astronauts medals that Lloyd's 140 00:08:16,960 --> 00:08:19,840 Speaker 3: had paid to print up incredible publicity. I'd say, you 141 00:08:19,880 --> 00:08:21,720 Speaker 3: can't buy it, but Lloyd's kind of did buy it. Yes, 142 00:08:21,840 --> 00:08:23,480 Speaker 3: And there's a moment that I'm going to call the 143 00:08:23,560 --> 00:08:27,280 Speaker 3: peak for Lloyd's right in here. It's nineteen eighty six, 144 00:08:28,040 --> 00:08:32,199 Speaker 3: when Queen Elizabeth opened Lloyd's big, new, fancy headquarters. 145 00:08:32,720 --> 00:08:36,600 Speaker 1: I love this picture of Queen Elizabeth her technical title 146 00:08:36,960 --> 00:08:39,040 Speaker 1: by the grace of God of the United Kingdom of 147 00:08:39,079 --> 00:08:42,400 Speaker 1: Great Britain and Northern Ireland, and her of other realms 148 00:08:42,440 --> 00:08:45,800 Speaker 1: and territories, Queen Head of the Commonwealth, defender of the faith, 149 00:08:46,320 --> 00:08:49,920 Speaker 1: with giant scissors, cutting a big ribbon and being like 150 00:08:50,040 --> 00:08:50,840 Speaker 1: loryd sis show. 151 00:08:51,640 --> 00:08:54,000 Speaker 3: One lesson that I think is emerging on the show 152 00:08:54,240 --> 00:08:57,439 Speaker 3: is if a company opens a beautiful, fancy. 153 00:08:57,080 --> 00:08:58,480 Speaker 1: New building, especially at the Queen. 154 00:08:58,559 --> 00:09:00,640 Speaker 3: Yes, especially with the Queen, but I'm also thinking of 155 00:09:00,679 --> 00:09:02,880 Speaker 3: the Sears Tower. When Sears built the biggest power in 156 00:09:02,920 --> 00:09:06,080 Speaker 3: the world. Maybe it's the top. Let's talk about why 157 00:09:06,880 --> 00:09:11,640 Speaker 3: Lloyd's needed that new headquarters, because they'd outgrown the old one. 158 00:09:12,120 --> 00:09:16,680 Speaker 3: That growth was part of this much bigger transformation in 159 00:09:16,760 --> 00:09:20,440 Speaker 3: how a Lloyd's worked. You know, we started with guys 160 00:09:20,440 --> 00:09:23,640 Speaker 3: in a coffee shop, merchants agreeing to underwrite the risk 161 00:09:23,679 --> 00:09:26,080 Speaker 3: of a ship captain who walked in. But of course 162 00:09:26,120 --> 00:09:29,880 Speaker 3: that was hundreds of years earlier. The economy has totally transformed. 163 00:09:29,880 --> 00:09:34,679 Speaker 3: It's become bigger and more complex, and so it just 164 00:09:34,720 --> 00:09:36,880 Speaker 3: wasn't going to work to have, you know, underwriters being 165 00:09:36,880 --> 00:09:42,080 Speaker 3: solo operators. So these managing agent companies emerged, and more importantly, 166 00:09:43,400 --> 00:09:47,800 Speaker 3: the underwriters and the managing agents created syndicates, groups of 167 00:09:47,840 --> 00:09:50,760 Speaker 3: people that started out small and got bigger and bigger 168 00:09:50,760 --> 00:09:54,480 Speaker 3: over time. By the eighties, some syndicates had thousands of 169 00:09:54,520 --> 00:09:58,040 Speaker 3: people who all agreed basically to back the underwriter's policies. 170 00:09:58,080 --> 00:10:00,880 Speaker 3: So if there were profits and you were in the syndicate, 171 00:10:00,880 --> 00:10:03,200 Speaker 3: you'd make money. And usually there were profits, but if 172 00:10:03,200 --> 00:10:05,520 Speaker 3: there were losses, you were on the hook to share 173 00:10:05,520 --> 00:10:08,240 Speaker 3: in the losses. These are just ordinary people, ordinary people 174 00:10:08,280 --> 00:10:12,199 Speaker 3: with money, yeah, ordinary rich people, not that rich, not 175 00:10:12,240 --> 00:10:16,120 Speaker 3: in the insurance business. And they become known as names. 176 00:10:16,440 --> 00:10:17,920 Speaker 3: If you get in on this, you're known as a name, 177 00:10:17,960 --> 00:10:22,000 Speaker 3: of course, with a capital N. And becoming a name 178 00:10:22,360 --> 00:10:24,840 Speaker 3: at Lloyd's Capital End was a big deal. You had 179 00:10:24,880 --> 00:10:27,160 Speaker 3: to be rich, You had to get invited and then 180 00:10:27,200 --> 00:10:31,240 Speaker 3: you had to be accepted. Leads wasn't like begging to 181 00:10:31,320 --> 00:10:34,000 Speaker 3: take your money. And in fact, after you got invited 182 00:10:34,040 --> 00:10:38,320 Speaker 3: you had to go to Lloyd's to London, to this 183 00:10:38,400 --> 00:10:41,400 Speaker 3: special room in their headquarters called the Atom Room, with 184 00:10:41,440 --> 00:10:44,760 Speaker 3: the furniture from some eighteenth century country house. Capital a 185 00:10:45,000 --> 00:10:50,680 Speaker 3: capital R indeed, and in this room, a senior person 186 00:10:50,720 --> 00:10:53,439 Speaker 3: from Lloyd's told you what you were signing up for 187 00:10:53,600 --> 00:10:55,680 Speaker 3: by becoming a name. I assume you're sitting on leather, 188 00:10:55,880 --> 00:10:59,280 Speaker 3: so much leather, you're sitting in leather. Here's what it meant. 189 00:10:59,360 --> 00:11:03,120 Speaker 3: It meant you're putting up your capital, your stocks, your 190 00:11:03,160 --> 00:11:06,760 Speaker 3: bonds as a guarantee so that the syndicate that you're 191 00:11:06,880 --> 00:11:10,440 Speaker 3: joining can sell more insurance. And as a rich person, 192 00:11:10,520 --> 00:11:13,280 Speaker 3: you can still keep your bone and your stocks. You 193 00:11:13,320 --> 00:11:16,600 Speaker 3: can still get the dividends and the interest off of those, 194 00:11:16,960 --> 00:11:19,840 Speaker 3: but it's doing extra work your money because it's also 195 00:11:19,960 --> 00:11:22,800 Speaker 3: backing up this other thing exactly. And when the syndicate 196 00:11:22,880 --> 00:11:25,560 Speaker 3: makes a profit, as it usually does, you get to 197 00:11:25,600 --> 00:11:29,280 Speaker 3: share in that profit. And the syndicates are structured in 198 00:11:29,320 --> 00:11:33,760 Speaker 3: this way that is tax advantaged, which is a huge 199 00:11:33,800 --> 00:11:37,800 Speaker 3: deal in England because the taxes were so high, Like 200 00:11:37,880 --> 00:11:42,600 Speaker 3: in the seventies, the highest marginal rates in England were 201 00:11:42,760 --> 00:11:44,240 Speaker 3: ninety eight percent. 202 00:11:44,800 --> 00:11:48,320 Speaker 1: Ninety eight percent. It's like, it's like, why even go 203 00:11:48,360 --> 00:11:49,600 Speaker 1: to work at ninety eight percent? 204 00:11:49,880 --> 00:11:55,760 Speaker 3: Yes, now, it seemed like free money, but there was 205 00:11:55,800 --> 00:11:59,160 Speaker 3: a catch. There was a catch of course, if the 206 00:11:59,160 --> 00:12:02,280 Speaker 3: syndicate you were joining lost money, you had to share 207 00:12:02,320 --> 00:12:06,400 Speaker 3: in the losses, but the real catches you weren't just 208 00:12:06,720 --> 00:12:08,640 Speaker 3: on the hook for the capital you pledge. So you 209 00:12:08,679 --> 00:12:14,760 Speaker 3: pledge whatever, one hundred thousand pounds fine. Your liability when 210 00:12:14,760 --> 00:12:16,840 Speaker 3: you signed up to be a name was not limited 211 00:12:16,880 --> 00:12:19,880 Speaker 3: to the money you put up. It was unlimited. We're 212 00:12:19,960 --> 00:12:23,480 Speaker 3: used to talking about limited liability. This was unlimited liability. 213 00:12:23,679 --> 00:12:28,640 Speaker 1: Limited liability as in limited liability corporations, and yeah, Aaron 214 00:12:28,679 --> 00:12:29,640 Speaker 1: and Sons limited. 215 00:12:29,760 --> 00:12:33,199 Speaker 3: Every corporation, every big publicly traded corporation is a limited 216 00:12:33,240 --> 00:12:34,160 Speaker 3: liability corporation. 217 00:12:34,320 --> 00:12:37,600 Speaker 1: It was an innovation a couple hundred years ago that said, oh, 218 00:12:37,640 --> 00:12:39,680 Speaker 1: we can take investors and sure you can lose all 219 00:12:39,720 --> 00:12:42,440 Speaker 1: your investment money, but we're not going to like take 220 00:12:42,480 --> 00:12:45,240 Speaker 1: your home and your car and your pool. It's limited. 221 00:12:45,280 --> 00:12:48,920 Speaker 1: You have limited liability. That's what allowed commerce. 222 00:12:48,760 --> 00:12:51,880 Speaker 3: To boom, really right, because you can take a risk 223 00:12:52,040 --> 00:12:54,959 Speaker 3: starting a company, getting investment measurable risk. You put ten 224 00:12:55,040 --> 00:12:58,640 Speaker 3: thousand dollars into Enron stock, en Ron goes bust, you 225 00:12:58,720 --> 00:13:01,200 Speaker 3: lose that ten thousand dollars, but nobody calls you up 226 00:13:01,240 --> 00:13:03,199 Speaker 3: and is like, oh, by the way, you got to 227 00:13:03,280 --> 00:13:06,120 Speaker 3: sell your car and your house because Enron still ows money. 228 00:13:06,480 --> 00:13:09,960 Speaker 1: That's unlimited liability, and at Lloyd's that's what we're talking about. 229 00:13:10,120 --> 00:13:11,200 Speaker 3: That's what we're talking about. 230 00:13:11,280 --> 00:13:12,240 Speaker 1: And they like it. 231 00:13:12,920 --> 00:13:15,959 Speaker 3: They liked it because they thought it was this pure 232 00:13:16,000 --> 00:13:19,720 Speaker 3: expression of the free market, a true risk, and they 233 00:13:19,720 --> 00:13:22,880 Speaker 3: also thought it kept them honest. You know. The underwriters 234 00:13:22,920 --> 00:13:25,800 Speaker 3: often participated in their own syndicates, so they had their 235 00:13:25,800 --> 00:13:31,240 Speaker 3: own unlimited liability. And if you're buying insurance, you should 236 00:13:31,280 --> 00:13:34,160 Speaker 3: like this. The person selling me insurance is saying they 237 00:13:34,200 --> 00:13:37,600 Speaker 3: will either pay my claim or sell their house, sell 238 00:13:37,600 --> 00:13:40,920 Speaker 3: their car, sell everything they have to make good on it. 239 00:13:40,920 --> 00:13:45,080 Speaker 1: It's funny, right, Everything Lloyd's does has has two sides 240 00:13:45,120 --> 00:13:47,760 Speaker 1: to it. It has the pure mathematics and it has 241 00:13:47,800 --> 00:13:49,760 Speaker 1: a little bit of the showiness, a little bit of 242 00:13:49,800 --> 00:13:52,000 Speaker 1: the trust, a little bit of the brandy. And this 243 00:13:52,080 --> 00:13:54,560 Speaker 1: was another one that said, the rich and powerful of 244 00:13:54,559 --> 00:13:59,120 Speaker 1: Britain will give up everything they own for you, mister 245 00:13:59,160 --> 00:14:01,000 Speaker 1: satellite owner, if something should go wrong. 246 00:14:01,320 --> 00:14:03,760 Speaker 3: Yes, So things are going to go bad at Lloyd's. 247 00:14:03,840 --> 00:14:05,440 Speaker 1: Yes. And when that happens. 248 00:14:05,640 --> 00:14:08,240 Speaker 3: There is this key question, which is to what extent 249 00:14:08,640 --> 00:14:12,640 Speaker 3: did people really explain to the names what unlimited liabilit meant, 250 00:14:12,920 --> 00:14:15,680 Speaker 3: and you hear different stories about that. There's one story 251 00:14:15,720 --> 00:14:19,280 Speaker 3: of a guy at Lloyd's who would tell prospective names. Okay, 252 00:14:19,320 --> 00:14:23,200 Speaker 3: here's what unlimited liability means. Take out your checkbook. People 253 00:14:23,200 --> 00:14:26,480 Speaker 3: still had checkbooks. Write my name on there, date it, 254 00:14:26,880 --> 00:14:29,560 Speaker 3: sign it, and leave the amount blank. Now tear it 255 00:14:29,600 --> 00:14:31,280 Speaker 3: out and give it to me. He take it, and 256 00:14:31,360 --> 00:14:34,040 Speaker 3: he put it in his pocket, and he'd say, becoming 257 00:14:34,040 --> 00:14:37,720 Speaker 3: a name means I can cash this check for any 258 00:14:37,720 --> 00:14:42,720 Speaker 3: amount any time I need to. That's the version of 259 00:14:42,800 --> 00:14:45,400 Speaker 3: like really telling them what it's scary. Yes, lots of 260 00:14:45,520 --> 00:14:48,880 Speaker 3: names had different experiences or remembered it differently. 261 00:14:49,000 --> 00:14:49,560 Speaker 1: They said. 262 00:14:49,720 --> 00:14:54,520 Speaker 3: Unlimited liability was presented more as a technicality. Sure, yes, 263 00:14:54,560 --> 00:14:58,680 Speaker 3: it's technically there, but we have reinsurance. We have insurance 264 00:14:58,720 --> 00:15:01,280 Speaker 3: that covers us the insurer, so if anything goes bad, 265 00:15:01,640 --> 00:15:05,000 Speaker 3: the reinsurance will cover it. It's nothing to worry about. 266 00:15:05,720 --> 00:15:09,800 Speaker 3: One name said, somebody from Lloyd's told him that unlimited 267 00:15:09,840 --> 00:15:13,880 Speaker 3: liability was just a gin and to which I don't 268 00:15:13,920 --> 00:15:16,560 Speaker 3: exactly exactly understand what that means when I get the vibe, 269 00:15:16,560 --> 00:15:18,120 Speaker 3: but it's so English. 270 00:15:17,680 --> 00:15:19,880 Speaker 1: Shaman and chill as a gin and tonic. 271 00:15:20,200 --> 00:15:26,840 Speaker 3: Most British thing ever, and in fact, up until the seventies, 272 00:15:26,880 --> 00:15:30,880 Speaker 3: the nineteen seventies, being a name was extremely clubby. You know, 273 00:15:30,920 --> 00:15:33,040 Speaker 3: it is a very high status thing. Lloyd's was a 274 00:15:33,080 --> 00:15:36,520 Speaker 3: high class, high status institution. You had to be rich, 275 00:15:36,600 --> 00:15:39,120 Speaker 3: you had to have a lot of liquid assets to pledge. 276 00:15:40,640 --> 00:15:45,320 Speaker 3: But in the seventies the underwriters at Lloyd's realized they 277 00:15:45,360 --> 00:15:47,840 Speaker 3: needed more names in their syndicate so that they could 278 00:15:47,880 --> 00:15:51,360 Speaker 3: keep growing. They needed to grow beyond the club and 279 00:15:51,480 --> 00:15:55,960 Speaker 3: so they lowered the wealth requirements. They made it easier 280 00:15:55,960 --> 00:15:59,480 Speaker 3: to join, and they started sending out agents to recruit 281 00:15:59,560 --> 00:16:02,080 Speaker 3: new names, not just in England but around the world. 282 00:16:03,040 --> 00:16:06,840 Speaker 3: One guy apparently drove a Rolls Royce around New Zealand 283 00:16:06,840 --> 00:16:11,040 Speaker 3: and Australia has more of kind of a like sleazy 284 00:16:11,160 --> 00:16:13,240 Speaker 3: multi level mark vibe. To me, there like a high 285 00:16:13,240 --> 00:16:14,640 Speaker 3: class thing, but I guess it were you. 286 00:16:14,640 --> 00:16:17,680 Speaker 1: Roll into the outback town of Alice Springs and you're like, 287 00:16:18,320 --> 00:16:21,720 Speaker 1: good day, mate, would any of you like to have 288 00:16:21,840 --> 00:16:23,200 Speaker 1: unlimited liability? 289 00:16:23,960 --> 00:16:26,200 Speaker 3: There was another guy who like golfed his way through 290 00:16:26,200 --> 00:16:28,800 Speaker 3: the Midwest and the United States. That feels more on brand, 291 00:16:28,880 --> 00:16:32,800 Speaker 3: you know. And these new names do still have to 292 00:16:32,840 --> 00:16:36,280 Speaker 3: fly to London and go to that fancy room and 293 00:16:36,320 --> 00:16:39,840 Speaker 3: you know, hear the talk, and they do. And in 294 00:16:39,880 --> 00:16:44,480 Speaker 3: the meantime, famous people do keep signing up. Camilla Parker Bowles, 295 00:16:44,560 --> 00:16:49,240 Speaker 3: who today is the Queen Consort of England. Charles Schwab, Schwab, 296 00:16:49,280 --> 00:16:52,360 Speaker 3: the guy not Schwab, the broke was a name, was 297 00:16:52,440 --> 00:16:54,600 Speaker 3: a name. He was indeed a couple guys from Pink 298 00:16:54,600 --> 00:16:59,640 Speaker 3: Floyd by the way, which one's pink. But also also 299 00:16:59,760 --> 00:17:03,800 Speaker 3: now names are ordinary people who are not famous names. 300 00:17:03,800 --> 00:17:06,679 Speaker 3: You know, they're doctors and accountants, and I'm sure there 301 00:17:06,679 --> 00:17:08,720 Speaker 3: were some dentists. There's always some dentists. 302 00:17:08,800 --> 00:17:11,280 Speaker 1: You talked about giant buildings as the sign of the 303 00:17:11,320 --> 00:17:14,399 Speaker 1: top of any industry, but I think this is the 304 00:17:14,400 --> 00:17:17,119 Speaker 1: moment that shows the most risk. When you know that 305 00:17:17,200 --> 00:17:19,440 Speaker 1: something works and you're like, well, let's let a few 306 00:17:19,520 --> 00:17:22,840 Speaker 1: dentists in, you know, a few air conditioning repair company 307 00:17:22,840 --> 00:17:25,919 Speaker 1: owners in. This is the moment at which you're taking 308 00:17:25,960 --> 00:17:28,040 Speaker 1: more risk, bringing more people onto the line. 309 00:17:28,280 --> 00:17:30,520 Speaker 3: And I mean what that makes me think of is 310 00:17:30,560 --> 00:17:33,720 Speaker 3: what's happening right now with private equity and like normal 311 00:17:33,760 --> 00:17:34,880 Speaker 3: people retirement accounts. 312 00:17:34,880 --> 00:17:36,200 Speaker 1: I'm not this is not investment advice. 313 00:17:36,240 --> 00:17:38,560 Speaker 3: I don't have a view, but this is that moment 314 00:17:38,640 --> 00:17:42,040 Speaker 3: for private equity right today. So this recruiting policy works, 315 00:17:42,200 --> 00:17:45,000 Speaker 3: and between the early seventies and the late eighties, the 316 00:17:45,119 --> 00:17:49,760 Speaker 3: number of names capital end goes from seven thousand to 317 00:17:49,840 --> 00:17:53,040 Speaker 3: more than thirty thousand. And for most of the time, 318 00:17:53,440 --> 00:17:55,439 Speaker 3: being a name is in fact great. You get the 319 00:17:55,480 --> 00:17:58,120 Speaker 3: tax benefits, you get study profits, you get to say 320 00:17:58,160 --> 00:18:01,119 Speaker 3: you're a name, you get to watch the queen open 321 00:18:01,160 --> 00:18:06,400 Speaker 3: your new office. And then around nineteen ninety, after three 322 00:18:06,480 --> 00:18:35,679 Speaker 3: hundred years of Lloyd's glory, things get gory. We're back 323 00:18:35,720 --> 00:18:38,920 Speaker 3: from the ads, and this is the moment when things 324 00:18:38,960 --> 00:18:42,120 Speaker 3: are going to start going wrong at Lloyd's. And there's 325 00:18:42,240 --> 00:18:44,080 Speaker 3: kind of a bunch of bad things that start happening 326 00:18:44,119 --> 00:18:46,040 Speaker 3: at Lloyd's in the late eighties. But I think you 327 00:18:46,040 --> 00:18:51,560 Speaker 3: can boil it down to two. Mainly. The first one 328 00:18:52,200 --> 00:18:56,560 Speaker 3: is asbestos, the naturally occurring fiber that people have used 329 00:18:56,560 --> 00:19:00,160 Speaker 3: for its flexible fireproof qualities for thousands of years. Didn't 330 00:19:00,160 --> 00:19:02,600 Speaker 3: know until I wrote this show that it was naturally occurring. 331 00:19:02,640 --> 00:19:05,280 Speaker 1: One hundred percent organic. I guess it says all the two. 332 00:19:05,320 --> 00:19:09,479 Speaker 3: That's right. Asbestos became wildly popular in the twentieth century 333 00:19:09,480 --> 00:19:13,160 Speaker 3: for things like insallation and building materials. 334 00:19:12,800 --> 00:19:15,080 Speaker 1: So common. It's in my basement. And when we had 335 00:19:15,119 --> 00:19:17,640 Speaker 1: inspection gone, they're like, yeah, there's a lot of asbestos here. 336 00:19:17,800 --> 00:19:20,000 Speaker 1: Just don't spend a lot of time down here. 337 00:19:20,080 --> 00:19:20,760 Speaker 3: And it's still there. 338 00:19:20,800 --> 00:19:22,600 Speaker 1: It's still there. They're like, do not touch it, do 339 00:19:22,720 --> 00:19:24,200 Speaker 1: not remove it, don't do anything. 340 00:19:23,960 --> 00:19:26,879 Speaker 3: Good to know, that's kind of shocking. No, it is ubiquitous. 341 00:19:26,880 --> 00:19:29,560 Speaker 3: Certainly by the late twentieth century, it was ubiquitous. 342 00:19:29,160 --> 00:19:30,000 Speaker 1: Old buildings in New York. 343 00:19:30,080 --> 00:19:32,600 Speaker 3: Yeah, And it became clear over the decades of the 344 00:19:32,600 --> 00:19:35,439 Speaker 3: twentieth century that people who were exposed to asbestos for 345 00:19:35,520 --> 00:19:38,520 Speaker 3: a prolonged period of time, typically at work because they 346 00:19:38,560 --> 00:19:43,480 Speaker 3: worked with it, could develop cancer decades later as a 347 00:19:43,520 --> 00:19:47,119 Speaker 3: result of their exposure. Hundreds of thousands of people wound 348 00:19:47,160 --> 00:19:51,439 Speaker 3: up dying from asbestos exposure. Whole towns where asbestos was 349 00:19:51,560 --> 00:19:55,520 Speaker 3: mined were contaminated, and in nineteen sixty nine, a former 350 00:19:55,640 --> 00:20:01,560 Speaker 3: insulation installer named Clarence Burrell was dying of mesothelioma, of 351 00:20:01,600 --> 00:20:04,879 Speaker 3: this kind of cancer you get from from asbestos exposure, 352 00:20:05,600 --> 00:20:08,520 Speaker 3: and he sued a bunch of asbestos companies arguing that 353 00:20:08,600 --> 00:20:12,680 Speaker 3: they failed to disclose the risks associated with their product. 354 00:20:13,280 --> 00:20:16,119 Speaker 3: He actually died before the case went to trial, but 355 00:20:16,200 --> 00:20:19,920 Speaker 3: his widow continued the case and won. The jury awarded 356 00:20:20,440 --> 00:20:24,720 Speaker 3: Burrell's widow damages of seventy nine, four hundred and thirty 357 00:20:24,720 --> 00:20:30,000 Speaker 3: six dollars, a modest sum. But this was just the beginning. Asbestos, 358 00:20:30,280 --> 00:20:32,680 Speaker 3: you know, was everywhere. By this point, millions of people 359 00:20:32,680 --> 00:20:35,080 Speaker 3: had worked with it, and over the course of the 360 00:20:35,160 --> 00:20:39,399 Speaker 3: seventies and eighties, it snowballed. You know, first it was 361 00:20:39,440 --> 00:20:43,440 Speaker 3: a few cases, than hundreds, then thousands, then tens of thousands, 362 00:20:43,440 --> 00:20:49,320 Speaker 3: these mass torts, and then school districts started suing asbestos 363 00:20:49,359 --> 00:20:52,199 Speaker 3: companies because they had to pay all this money to 364 00:20:52,240 --> 00:20:55,920 Speaker 3: remove the asbestos from their buildings. And bigger and bigger 365 00:20:55,960 --> 00:21:00,439 Speaker 3: and bigger verdicts keep coming in. And you know who 366 00:21:01,160 --> 00:21:03,199 Speaker 3: insured a lot of the companies that were on the 367 00:21:03,200 --> 00:21:04,320 Speaker 3: hook to pay. 368 00:21:04,119 --> 00:21:08,280 Speaker 1: Out Lloyds, the syndicates at Lloyd's. And we haven't really 369 00:21:08,280 --> 00:21:11,159 Speaker 1: talked about this, but one of the ways that insurance 370 00:21:11,240 --> 00:21:17,120 Speaker 1: works is ensuring uncorrelated risks. The business only works if 371 00:21:17,160 --> 00:21:20,679 Speaker 1: you ensure, for instance, your house and my house for 372 00:21:20,800 --> 00:21:23,720 Speaker 1: fire insurance. But we even though we live close to 373 00:21:23,760 --> 00:21:25,800 Speaker 1: each other. The odds of my house and your house 374 00:21:25,840 --> 00:21:28,480 Speaker 1: burning out the same time are small, And if you 375 00:21:28,520 --> 00:21:31,160 Speaker 1: have a lot of uncorrelated risks, things can go bad 376 00:21:31,200 --> 00:21:32,840 Speaker 1: in one part of the economy, in one part of 377 00:21:32,880 --> 00:21:37,040 Speaker 1: the country, in one neighborhood, and you don't have to 378 00:21:37,080 --> 00:21:39,040 Speaker 1: pay out to other parts of the country. But we're 379 00:21:39,080 --> 00:21:42,199 Speaker 1: talking about something here that is immensely correlated, that was 380 00:21:42,320 --> 00:21:43,920 Speaker 1: everywhere and all at once. 381 00:21:44,040 --> 00:21:47,200 Speaker 3: Now, there is a kind of safety net for insurance 382 00:21:47,200 --> 00:21:52,080 Speaker 3: companies in this situation, which is reinsurance. 383 00:21:52,920 --> 00:21:58,119 Speaker 1: Reinsurance. I love reinsurance. Reinsurance is the insurance company for 384 00:21:58,320 --> 00:22:01,879 Speaker 1: insurance companies. Yes, So if you're an insurance company that 385 00:22:02,320 --> 00:22:06,119 Speaker 1: writes policies in Florida and there's another insurance company that 386 00:22:06,200 --> 00:22:10,600 Speaker 1: writes policies in California, there's a reinsurance company that might 387 00:22:10,640 --> 00:22:12,960 Speaker 1: take you both on, thinking, well, well, Florida may have 388 00:22:13,000 --> 00:22:15,359 Speaker 1: a huge problem, California may have a huge problem, but 389 00:22:15,440 --> 00:22:19,760 Speaker 1: probably both companies aren't gonna face challenges at the same time. 390 00:22:19,880 --> 00:22:23,200 Speaker 1: So it's one level up reinsurance insurance for insurance. 391 00:22:23,280 --> 00:22:26,920 Speaker 3: Yes. Now, remember I said there were two problems. One 392 00:22:27,000 --> 00:22:31,720 Speaker 3: was asbestos, the other one was reinsurance. Lots of the 393 00:22:31,760 --> 00:22:35,600 Speaker 3: syndicates at Lloyd's were in the reinsurance business as well 394 00:22:35,640 --> 00:22:40,200 Speaker 3: as the insurance business, and they were in the re 395 00:22:40,200 --> 00:22:41,400 Speaker 3: reinsurance business. 396 00:22:41,680 --> 00:22:43,679 Speaker 1: There is re reinsurance. I did not know that. 397 00:22:43,720 --> 00:22:45,520 Speaker 3: I feel like we've talked about I feel like we've 398 00:22:45,600 --> 00:22:50,080 Speaker 3: just idly wondered is there reinsurance for reinsurance? There is, 399 00:22:50,160 --> 00:22:54,000 Speaker 3: I learned we're here on this show. It's called retro session. 400 00:22:54,760 --> 00:23:00,000 Speaker 3: The people who sell reinsurance for reinsurance are called retro sessionaires. 401 00:23:00,520 --> 00:23:04,080 Speaker 3: Side note, I feel like another risk sign besides dentists 402 00:23:04,080 --> 00:23:07,800 Speaker 3: and fancy new buildings is fancy French terms for financial 403 00:23:07,800 --> 00:23:09,960 Speaker 3: products tranch. I'm looking at. 404 00:23:09,880 --> 00:23:13,560 Speaker 1: You, unbelievable. Retrocession. Is the reason why we don't know 405 00:23:13,960 --> 00:23:17,360 Speaker 1: this term is this is so far up the insurance 406 00:23:17,680 --> 00:23:21,760 Speaker 1: and reinsurance and re reinsurance ladder that it probably doesn't 407 00:23:21,880 --> 00:23:23,200 Speaker 1: come up very often. 408 00:23:23,119 --> 00:23:26,040 Speaker 3: Right, And this is actually part of the reason that 409 00:23:26,119 --> 00:23:31,119 Speaker 3: the reinsurance business at Lloyd's gets into trouble because the 410 00:23:31,240 --> 00:23:35,400 Speaker 3: people selling retro session selling the reinsurance on reinsurance. We're 411 00:23:35,440 --> 00:23:37,480 Speaker 3: selling it too cheap, which is a natural thing to 412 00:23:37,520 --> 00:23:40,560 Speaker 3: do in that business because you don't often have to 413 00:23:40,560 --> 00:23:42,200 Speaker 3: pay a claim you only have to pay a claim 414 00:23:42,200 --> 00:23:44,440 Speaker 3: when like, it goes all the way up the chain 415 00:23:44,520 --> 00:23:44,880 Speaker 3: to you. 416 00:23:44,960 --> 00:23:47,879 Speaker 1: When there's a huge problem that covers so many different 417 00:23:47,880 --> 00:23:51,719 Speaker 1: companies and areas of the world and is overwhelming, and 418 00:23:51,760 --> 00:23:53,800 Speaker 1: that rarely happens. You don't have the data for how 419 00:23:53,800 --> 00:23:54,760 Speaker 1: often that happens. 420 00:23:54,720 --> 00:23:57,679 Speaker 3: And so it's natural to sell the policies cheaper and 421 00:23:57,720 --> 00:24:00,439 Speaker 3: cheaper because you're like, oh, it's just profit. It's just profit. 422 00:24:00,480 --> 00:24:03,040 Speaker 3: We're not having to pay claims. It actually reminds me 423 00:24:03,080 --> 00:24:06,200 Speaker 3: of that line from Nasin Talib He is in a 424 00:24:06,200 --> 00:24:10,640 Speaker 3: different context, but picking up pennies in front of a steamroller, right, 425 00:24:10,880 --> 00:24:13,600 Speaker 3: it's this idea of tailor, right, this rare risk that 426 00:24:13,640 --> 00:24:15,879 Speaker 3: is very hard to calculate. But picking up pennies in 427 00:24:15,880 --> 00:24:18,159 Speaker 3: front of a steamroll, you're just like, oh, free money, 428 00:24:18,520 --> 00:24:20,439 Speaker 3: I'm picking up this free money. You have to hear 429 00:24:20,480 --> 00:24:23,760 Speaker 3: and then you'll look over your shoulders. Ah, here comes 430 00:24:23,760 --> 00:24:27,359 Speaker 3: the steam roll. This starts to become a problem for 431 00:24:27,480 --> 00:24:31,040 Speaker 3: Lloyd's even before the worst of the asbestos verdicts come in, 432 00:24:31,400 --> 00:24:34,920 Speaker 3: because they are just all of these uncorrelated bad things happen. 433 00:24:35,000 --> 00:24:38,680 Speaker 3: There's an oil platform that blew up in the North 434 00:24:38,720 --> 00:24:41,879 Speaker 3: Sea there's the Exxon Valdis, which I'm sure you remember, 435 00:24:42,000 --> 00:24:44,760 Speaker 3: hit a reef in Alaska and spilled a bunch of oil. 436 00:24:44,960 --> 00:24:48,320 Speaker 3: And then Hurricane Hugo swept through the Caribbean and the 437 00:24:48,359 --> 00:24:51,639 Speaker 3: Southeast US, and so suddenly they are just all of 438 00:24:51,680 --> 00:24:54,560 Speaker 3: these giant claims. And then you have the sbestos judgments 439 00:24:54,600 --> 00:24:55,000 Speaker 3: coming in. 440 00:24:55,359 --> 00:24:59,080 Speaker 1: So the insurance syndicates at Lloyd's go to their reinsurer 441 00:24:59,800 --> 00:25:03,439 Speaker 1: who is also reinsuring places like all State and Travelers Insurance, 442 00:25:03,440 --> 00:25:05,959 Speaker 1: who are also seeing a lot of these same claims, 443 00:25:06,080 --> 00:25:09,000 Speaker 1: especially from like the hurricane that came through. So the 444 00:25:09,040 --> 00:25:12,800 Speaker 1: reinsurance company is like time to turn to the re reinsurancer. 445 00:25:13,080 --> 00:25:18,280 Speaker 1: The retrocessionaire's good, and the retrocessionaire does not have enough money. 446 00:25:18,440 --> 00:25:21,800 Speaker 1: And there is a second problem that is related, also 447 00:25:22,000 --> 00:25:25,080 Speaker 1: related to reinsurance. And to explain that, let's just do 448 00:25:25,119 --> 00:25:28,320 Speaker 1: a little toy model. Okay, let's say we're all in 449 00:25:28,359 --> 00:25:31,439 Speaker 1: the business of selling insurance. So Robert, I come to 450 00:25:31,520 --> 00:25:34,760 Speaker 1: you and I want to lay off some of my risks, 451 00:25:34,800 --> 00:25:39,200 Speaker 1: so I buy reinsurance from you. Great, happy to do it, 452 00:25:38,880 --> 00:25:41,640 Speaker 1: but I don't want to lose my home, So I'm 453 00:25:41,680 --> 00:25:46,600 Speaker 1: going to lay off my reinsurance to our producer, Gabriel Good. 454 00:25:46,640 --> 00:25:53,280 Speaker 3: So he is selling you retrocession retrocession. Now he also 455 00:25:53,320 --> 00:25:57,320 Speaker 3: wants to laugh some of his risk. Here's the crazy part. 456 00:25:58,320 --> 00:26:01,640 Speaker 3: You know who he goes to for coverage on his retrocession. 457 00:26:02,320 --> 00:26:02,399 Speaker 1: Me. 458 00:26:03,080 --> 00:26:05,800 Speaker 3: He goes to me and I sell it to him. 459 00:26:06,040 --> 00:26:08,280 Speaker 3: It's not exactly this, but this is a basic model 460 00:26:08,320 --> 00:26:10,440 Speaker 3: of how it worked. The key thing is you want 461 00:26:10,440 --> 00:26:12,720 Speaker 3: this kind of thing to be a ladder, right, You 462 00:26:12,760 --> 00:26:16,639 Speaker 3: want it to go up a chain. At Lloyd's it 463 00:26:16,800 --> 00:26:17,919 Speaker 3: was a spiral. 464 00:26:18,560 --> 00:26:22,679 Speaker 1: Is this a problem because there wasn't central control of 465 00:26:22,720 --> 00:26:23,800 Speaker 1: the syndicates? 466 00:26:23,400 --> 00:26:28,080 Speaker 3: It's partly that. It's partly like every time somebody's sold 467 00:26:28,119 --> 00:26:31,040 Speaker 3: another policy, they got another commission, right, So there's some 468 00:26:31,080 --> 00:26:33,919 Speaker 3: amount of just sort of corruption. I think there's some 469 00:26:34,040 --> 00:26:37,200 Speaker 3: amount of when you are just making money year after 470 00:26:37,280 --> 00:26:42,880 Speaker 3: year after year, you underestimate risk. Right. It is quite 471 00:26:42,920 --> 00:26:46,600 Speaker 3: analogous to the financial crisis in a lot of ways. Right, 472 00:26:46,640 --> 00:26:50,520 Speaker 3: this complex system. Nobody knows who holds what risk. It's 473 00:26:50,560 --> 00:26:53,720 Speaker 3: kind of circular. There's French names for things, and there's 474 00:26:53,800 --> 00:26:56,399 Speaker 3: tail risk. It's like, oh, surely not all the house 475 00:26:56,400 --> 00:26:58,040 Speaker 3: prices in America are going to go down at the 476 00:26:58,080 --> 00:26:58,720 Speaker 3: same time. 477 00:26:58,680 --> 00:27:02,960 Speaker 1: And every year that the disaster doesn't happen, you're growing 478 00:27:03,320 --> 00:27:06,840 Speaker 1: and you take on more risk. It's just natural until 479 00:27:06,840 --> 00:27:08,919 Speaker 1: you wake up one morning and figure out that you 480 00:27:09,040 --> 00:27:13,600 Speaker 1: are your own insurer and re ensure and retro session. 481 00:27:13,720 --> 00:27:16,240 Speaker 3: Yeah, and there's not enough money in the pot. So 482 00:27:17,000 --> 00:27:20,760 Speaker 3: we're at this moment now, it's the early nineties. This 483 00:27:21,440 --> 00:27:27,040 Speaker 3: spiral reinsurance problem, combined with the asbestos verdicts, meant that 484 00:27:27,840 --> 00:27:31,760 Speaker 3: lots of Lloyd syndicates just didn't have enough money to 485 00:27:31,880 --> 00:27:36,359 Speaker 3: pay their claims. And this is when we return to 486 00:27:36,840 --> 00:27:38,359 Speaker 3: unlimited liability. 487 00:27:38,480 --> 00:27:41,199 Speaker 1: So they open their address book. They have famous and 488 00:27:41,320 --> 00:27:43,960 Speaker 1: rich names all up and down the address book and they. 489 00:27:43,800 --> 00:27:46,720 Speaker 3: Say, well, they say, you know that one hundred thousand 490 00:27:46,800 --> 00:27:51,200 Speaker 3: pounds that you put up that's gone, but it's not enough. 491 00:27:51,960 --> 00:27:53,320 Speaker 1: You need to chip in. 492 00:27:53,359 --> 00:27:56,520 Speaker 3: You need to pay whatever share of the additional losses 493 00:27:56,560 --> 00:27:58,640 Speaker 3: we owe. And in some cases it was a lot 494 00:27:58,680 --> 00:28:01,320 Speaker 3: of money. Oh you don't have that money in the bank, fine, 495 00:28:01,560 --> 00:28:05,680 Speaker 3: sell your house, sell your car. You signed up for 496 00:28:05,760 --> 00:28:09,119 Speaker 3: unlimited liability. It's happening now. This is what it means. 497 00:28:09,359 --> 00:28:10,520 Speaker 1: We're cashing the blank check. 498 00:28:10,640 --> 00:28:14,400 Speaker 3: We're cashing the blank check and some people lost everything, 499 00:28:14,760 --> 00:28:19,040 Speaker 3: some people went bankrupt, some people committed suicide, and still 500 00:28:19,920 --> 00:28:23,639 Speaker 3: there was this worry that Lloyd's might not be able 501 00:28:23,720 --> 00:28:26,160 Speaker 3: to get enough money to pay the claims it owed. 502 00:28:26,200 --> 00:28:28,960 Speaker 3: And we've been talking about how the modern world is 503 00:28:29,080 --> 00:28:32,600 Speaker 3: built on Lloyd's to some significant extent. 504 00:28:32,400 --> 00:28:35,840 Speaker 1: On their reputation hundreds of years. At this point, they've 505 00:28:35,840 --> 00:28:39,040 Speaker 1: built up this reputation by paying out when it was painful, and. 506 00:28:38,960 --> 00:28:41,320 Speaker 3: So yes, it is a risk to Lloyd's reputation. It's 507 00:28:41,360 --> 00:28:43,640 Speaker 3: also a risk kind of to the global economy in 508 00:28:43,680 --> 00:28:46,320 Speaker 3: a similar way to the two thousand and eight financial crisis. 509 00:28:46,600 --> 00:28:51,800 Speaker 3: Lloyd's is this central link in lots of different economic chains, 510 00:28:52,080 --> 00:28:55,520 Speaker 3: and if suddenly they can't pay, people are worried that 511 00:28:55,560 --> 00:28:57,160 Speaker 3: there's going to be this chain reaction. 512 00:28:57,360 --> 00:28:59,360 Speaker 1: If you can't trust Lloyd's, who can you trust. 513 00:28:59,400 --> 00:29:02,080 Speaker 3: If Lloyd's doesn't have the money, what's going to happen? 514 00:29:02,640 --> 00:29:13,680 Speaker 4: After the break, we tell you what happens. 515 00:29:27,640 --> 00:29:30,640 Speaker 1: We are back from the break, and just to remind you, 516 00:29:31,040 --> 00:29:34,560 Speaker 1: the entire world economy is on the brink because of Lloyd's. 517 00:29:35,640 --> 00:29:39,320 Speaker 3: We got two guys coming in to try and save Lloyd's. 518 00:29:41,080 --> 00:29:44,120 Speaker 3: One is an insider yeah, there's an outsider. Conveniently for 519 00:29:44,160 --> 00:29:49,320 Speaker 3: storytelling purposes. The insider is David Roland. His father worked 520 00:29:49,320 --> 00:29:51,240 Speaker 3: in insurance in the City of London. He went to 521 00:29:51,320 --> 00:29:55,320 Speaker 3: Cambridge got into the insurance business as soon as he graduated. 522 00:29:55,400 --> 00:29:56,800 Speaker 1: Of course, he knew he wanted to do that his 523 00:29:56,800 --> 00:29:57,200 Speaker 1: whole life. 524 00:29:57,240 --> 00:30:00,080 Speaker 3: Spent thirty five years as a broker at the Lloyd's 525 00:30:00,160 --> 00:30:05,040 Speaker 3: market and he became the chairman of Lloyd's. The outsider 526 00:30:05,240 --> 00:30:08,200 Speaker 3: was a guy named Peter Middleton, son of a laborer, 527 00:30:09,360 --> 00:30:11,960 Speaker 3: spent three years at a monastery as a young man, 528 00:30:12,120 --> 00:30:15,120 Speaker 3: worked as a truck driver and as a British spy 529 00:30:15,320 --> 00:30:18,400 Speaker 3: in France and Tanzania. He became the CEO of Lloyd's. 530 00:30:18,840 --> 00:30:21,120 Speaker 3: And being the CEO of Lloyd's or the chairman of 531 00:30:21,200 --> 00:30:23,960 Speaker 3: Lloyd's is not like being CEO or chairman at a 532 00:30:23,960 --> 00:30:29,520 Speaker 3: normal company, because again, the brokers are the underwriters managing agents. 533 00:30:29,560 --> 00:30:34,120 Speaker 3: They don't work for Lloyd's. They work at Lloyd's. Roland 534 00:30:34,160 --> 00:30:37,080 Speaker 3: and Middleton are not their bosses. It's more like they 535 00:30:37,160 --> 00:30:39,360 Speaker 3: run the New York Stock Exchange or something. And so 536 00:30:39,440 --> 00:30:42,320 Speaker 3: that means that Roland and Middleton can't just make whatever 537 00:30:42,400 --> 00:30:44,680 Speaker 3: changes they want. They can't just come in and tell 538 00:30:44,680 --> 00:30:45,520 Speaker 3: people what to do. 539 00:30:45,560 --> 00:30:50,040 Speaker 1: They have to convince and cajole. They're mostly responsible for 540 00:30:50,080 --> 00:30:53,120 Speaker 1: the paper towels in the kitchen. They're at Lloyd's like 541 00:30:53,440 --> 00:30:54,600 Speaker 1: just keeping the whole thing running. 542 00:30:54,680 --> 00:30:57,280 Speaker 3: I mean more than that. More than that they do. 543 00:30:57,760 --> 00:31:00,040 Speaker 3: They do need to transform it. They just need to 544 00:31:00,080 --> 00:31:04,520 Speaker 3: bring everybody along. And so they start having these meetings 545 00:31:05,160 --> 00:31:08,200 Speaker 3: with thousands of people with you know, among others, these 546 00:31:08,400 --> 00:31:11,000 Speaker 3: disgruntled names who are suddenly on the hook for huge 547 00:31:11,000 --> 00:31:14,280 Speaker 3: amounts of money. They actually have one meeting at the 548 00:31:14,400 --> 00:31:18,160 Speaker 3: Royal Albert Hall, which I guess is London's version of 549 00:31:18,360 --> 00:31:21,240 Speaker 3: Carnegie Hall, and at the beginning of the meeting, Roland 550 00:31:21,680 --> 00:31:24,920 Speaker 3: walks up to the podium and he says good morning, 551 00:31:25,000 --> 00:31:28,640 Speaker 3: ladies and gentlemen, and somebody from the audience goes liar. 552 00:31:30,600 --> 00:31:33,760 Speaker 1: So, you know, like it was not going to go well. 553 00:31:33,840 --> 00:31:36,320 Speaker 3: It wasn't going to well. Nobody trusts them, right, Nobody 554 00:31:36,680 --> 00:31:41,280 Speaker 3: trusts Lloyds, Nobody trusts these guys. You know, we're trying 555 00:31:41,320 --> 00:31:44,400 Speaker 3: to change it. But they know they do have to 556 00:31:44,480 --> 00:31:48,200 Speaker 3: change Lloyd's or it's just going to fail. In fact, 557 00:31:48,320 --> 00:31:51,040 Speaker 3: Roland later said he knew either he would solve the 558 00:31:51,040 --> 00:31:53,680 Speaker 3: crisis at Lloyd's or he would be the last chairman 559 00:31:53,800 --> 00:31:57,360 Speaker 3: at Lloyd's because Lloyds would cease to exist. And so 560 00:31:58,040 --> 00:32:02,080 Speaker 3: they come up with a plan with three key steps 561 00:32:02,200 --> 00:32:08,640 Speaker 3: really to try and save Lloyds. Step one, settle with 562 00:32:08,800 --> 00:32:12,440 Speaker 3: the names, make a deal with the names offered to 563 00:32:12,480 --> 00:32:14,880 Speaker 3: write off a bunch of the money that the names owed, 564 00:32:15,240 --> 00:32:18,400 Speaker 3: cap their liabilities at one hundred thousand pounds each instead 565 00:32:18,440 --> 00:32:23,480 Speaker 3: of being unlimited, and in exchange, have the names promise 566 00:32:24,280 --> 00:32:25,160 Speaker 3: to stop suing. 567 00:32:25,440 --> 00:32:28,840 Speaker 1: Basically, well, these are the richest and most powerful people 568 00:32:29,080 --> 00:32:30,480 Speaker 1: in the nation and around the world. 569 00:32:30,600 --> 00:32:33,200 Speaker 3: Yes, and also some not so rich and powerful people 570 00:32:33,200 --> 00:32:37,320 Speaker 3: who are truly in extremely bad situations because of their 571 00:32:38,040 --> 00:32:42,040 Speaker 3: joining Lloyd's, and who, by the way, are alleging fraud. 572 00:32:42,280 --> 00:32:46,120 Speaker 3: They're not just like sour grapes. They're saying, you didn't 573 00:32:46,160 --> 00:32:48,840 Speaker 3: tell me the risk. You yeah, and you knew or 574 00:32:48,840 --> 00:32:52,080 Speaker 3: should have known about this risk. There was this allegation 575 00:32:52,400 --> 00:32:56,280 Speaker 3: that Lloyd's was doing this thing. Recruit to dilute was 576 00:32:56,320 --> 00:32:59,800 Speaker 3: a phrase. The allegation was Lloyd's knew how bad it 577 00:32:59,880 --> 00:33:01,400 Speaker 3: was going to be and they brought in names to 578 00:33:02,400 --> 00:33:05,040 Speaker 3: take the loss. So Step one settle with the names. 579 00:33:06,280 --> 00:33:12,120 Speaker 3: Step two, spin off all of those pre nineteen ninety 580 00:33:12,160 --> 00:33:17,720 Speaker 3: three liabilities, all those old asbestos policies, and put those 581 00:33:18,240 --> 00:33:20,960 Speaker 3: liabilities into what in finance you would call a bad 582 00:33:21,160 --> 00:33:22,480 Speaker 3: bank finance. 583 00:33:22,240 --> 00:33:24,680 Speaker 1: Evils, evil lloids. 584 00:33:25,480 --> 00:33:28,480 Speaker 3: Spoiler alert, they're not gonna call it that, but kind 585 00:33:28,520 --> 00:33:31,400 Speaker 3: of Yeah. And this is a thing finance does, right. 586 00:33:31,440 --> 00:33:34,400 Speaker 3: You move off the bad liabilities, and in this case 587 00:33:34,440 --> 00:33:37,840 Speaker 3: it would fundamentally be a reinsurer that would have to 588 00:33:37,920 --> 00:33:39,120 Speaker 3: settle all those old. 589 00:33:38,880 --> 00:33:43,520 Speaker 1: Claims, and it allows the company to make new contracts, 590 00:33:43,840 --> 00:33:45,680 Speaker 1: take new chances, and that sort of thing. There is 591 00:33:45,720 --> 00:33:48,440 Speaker 1: an actual reason to do this because you can take 592 00:33:48,480 --> 00:33:52,280 Speaker 1: specialists who can deal with the most problematic of policies. 593 00:33:52,480 --> 00:33:57,720 Speaker 3: Yes, and step three. Step three for getting Aloids out 594 00:33:57,720 --> 00:34:03,160 Speaker 3: of this crisis is stop relying on capital from individuals 595 00:34:03,200 --> 00:34:09,040 Speaker 3: with unlimited liability. This central thing of Lloyds, they decide 596 00:34:09,120 --> 00:34:12,880 Speaker 3: isn't going to work anymore, and instead they want to 597 00:34:12,920 --> 00:34:19,400 Speaker 3: start letting corporations, regular limited liability corporations provide the capital 598 00:34:20,000 --> 00:34:22,080 Speaker 3: for underwriting at Lloyd's. 599 00:34:21,719 --> 00:34:23,760 Speaker 1: Which I guess means you're going to have to raise 600 00:34:24,040 --> 00:34:27,439 Speaker 1: more capital in order to make up for that. Yes, 601 00:34:27,560 --> 00:34:28,719 Speaker 1: fool of names, we backing you. 602 00:34:28,840 --> 00:34:31,560 Speaker 3: That's why you want to spin off the bad liabilities 603 00:34:31,560 --> 00:34:33,920 Speaker 3: into the bad bank so new capital will come out. 604 00:34:33,960 --> 00:34:35,120 Speaker 1: I trusted you on the math here. 605 00:34:35,320 --> 00:34:38,080 Speaker 3: So so Roland and Middleton come up with this plan 606 00:34:38,120 --> 00:34:40,239 Speaker 3: and they're trying to sell it to the Names and 607 00:34:40,480 --> 00:34:43,080 Speaker 3: at a meeting at the Royal Albert Hall. Pretty sure 608 00:34:43,080 --> 00:34:46,359 Speaker 3: it's that same meeting where somebody called Roland a liar. 609 00:34:46,400 --> 00:34:49,920 Speaker 3: Although I can't confirm that Middleton is talking. The other 610 00:34:49,920 --> 00:34:53,080 Speaker 3: guy is talking and he says to the audience, if 611 00:34:53,080 --> 00:34:55,960 Speaker 3: we don't implement this plan by the end of nineteen 612 00:34:56,040 --> 00:34:59,319 Speaker 3: ninety five, then you should fire me. And somebody from 613 00:34:59,360 --> 00:35:05,319 Speaker 3: the crowd yells, no, we won't, We'll shoot you. These 614 00:35:05,320 --> 00:35:05,920 Speaker 3: are the vibes. 615 00:35:06,000 --> 00:35:07,600 Speaker 1: These are vis Yeah, not good. 616 00:35:08,480 --> 00:35:10,840 Speaker 3: Not long after that, Middleton actually left Lloyd's to go 617 00:35:10,960 --> 00:35:13,040 Speaker 3: run the UK office for Solomon Brothers. 618 00:35:13,320 --> 00:35:13,839 Speaker 1: Got a raise. 619 00:35:13,920 --> 00:35:16,560 Speaker 3: Probably wasn't having people yelling they were going to shoot him. 620 00:35:17,080 --> 00:35:21,640 Speaker 3: But Lloyd's did manage to implement that plan. Something like 621 00:35:21,760 --> 00:35:24,839 Speaker 3: ninety five percent of the Names accepted that settlement deal 622 00:35:25,640 --> 00:35:29,919 Speaker 3: capped their liabilities, agreed not to sue. Lloyd's did create 623 00:35:29,960 --> 00:35:33,640 Speaker 3: a bad bank. A giant reinsurer called not Evil Lloyds. 624 00:35:33,719 --> 00:35:35,640 Speaker 3: But Equitas. 625 00:35:37,360 --> 00:35:39,520 Speaker 1: Oh that sounds so mild. 626 00:35:40,080 --> 00:35:43,440 Speaker 3: Equitas Equitas, it does sound villainous a it a like 627 00:35:43,719 --> 00:35:46,239 Speaker 3: backwards you from this Equitas? 628 00:35:46,320 --> 00:35:47,960 Speaker 1: Yeah? Sure, uh. 629 00:35:48,000 --> 00:35:49,840 Speaker 3: And and they did need to put a lot of 630 00:35:49,840 --> 00:35:51,960 Speaker 3: money into it. You can't just say like, oh, here's 631 00:35:52,239 --> 00:35:54,239 Speaker 3: here's the bad bank. Sorry, it doesn't have any money. 632 00:35:54,239 --> 00:35:56,120 Speaker 3: They had to put a ton of money into it. 633 00:35:56,120 --> 00:35:58,239 Speaker 3: They funded it with a special fee they levied on 634 00:35:58,280 --> 00:36:02,080 Speaker 3: the remaining names, and Lloyd sold off that fancy building 635 00:36:02,120 --> 00:36:05,000 Speaker 3: that the queen had opened and rented it back to 636 00:36:05,160 --> 00:36:08,319 Speaker 3: raise money and did in fact get all of its 637 00:36:08,360 --> 00:36:15,120 Speaker 3: old pre ninety three liabilities into Equitas U. Now step three, 638 00:36:15,280 --> 00:36:19,680 Speaker 3: they are ready to have that sweet sweet limited liability 639 00:36:19,719 --> 00:36:22,799 Speaker 3: capital flow into the Lloyd syndicates. 640 00:36:22,800 --> 00:36:25,160 Speaker 1: And this is the nineteen nineties. So so the economy 641 00:36:25,239 --> 00:36:27,000 Speaker 1: is growing. Money is around, money is. 642 00:36:27,000 --> 00:36:31,359 Speaker 3: Around, and interestingly, a lot of that money that's now 643 00:36:31,400 --> 00:36:36,800 Speaker 3: coming in is coming from insurance companies, actually regular insurance companies. 644 00:36:36,800 --> 00:36:38,839 Speaker 3: They're like, oh, it's the insurance business. We know about that. 645 00:36:38,960 --> 00:36:45,440 Speaker 3: And so today a lot of Lloyd's syndicates function largely 646 00:36:45,560 --> 00:36:48,360 Speaker 3: as arms of regular insurance companies. But they are in 647 00:36:48,440 --> 00:36:53,320 Speaker 3: this market that is still this weird special Lloyd's market. Now, 648 00:36:53,920 --> 00:36:56,279 Speaker 3: I said, ninety five percent or so of the names 649 00:36:56,320 --> 00:36:59,719 Speaker 3: accepted the settlement deal. There were those holdout names like 650 00:36:59,760 --> 00:37:03,000 Speaker 3: the guy screamed liar probably presumably presumably that guy did 651 00:37:03,000 --> 00:37:06,239 Speaker 3: not take the deal, and several hundred of those holdouts 652 00:37:06,680 --> 00:37:11,000 Speaker 3: did sue Lloyd's right and their core allegation was fraud. 653 00:37:11,120 --> 00:37:13,880 Speaker 3: Right knew about this, They should have known about this. 654 00:37:13,960 --> 00:37:17,080 Speaker 3: They basically lied to us and got us to take 655 00:37:17,160 --> 00:37:21,279 Speaker 3: this this risk. And it is clear that there were 656 00:37:21,280 --> 00:37:24,399 Speaker 3: at least some underwriters at Lloyd's who did know who 657 00:37:24,440 --> 00:37:27,520 Speaker 3: themselves steered clear of writing some of the worst policies. 658 00:37:28,040 --> 00:37:30,880 Speaker 3: But in the end, the judge in the case found 659 00:37:31,160 --> 00:37:34,160 Speaker 3: against the names, found in favor of Lloyd's, found that 660 00:37:34,560 --> 00:37:39,080 Speaker 3: the behavior of the Lloyd's underwriters, syndicates, managing agents did 661 00:37:39,120 --> 00:37:43,279 Speaker 3: not meet the legal definition of fraud. But he did 662 00:37:43,440 --> 00:37:47,520 Speaker 3: basically find that the people of Lloyd's were incompetent. Can 663 00:37:47,600 --> 00:37:49,840 Speaker 3: you read just this little bit from his decision? 664 00:37:50,680 --> 00:37:53,960 Speaker 1: The catalog of failings and incompetence in the nineteen eighties 665 00:37:53,960 --> 00:37:58,360 Speaker 1: by underwriters, managing agents, members, agents, and others is staggering 666 00:37:58,400 --> 00:38:04,520 Speaker 1: and brought disgrace. On one of the city's great markets. Disgrace, disgrace, 667 00:38:04,760 --> 00:38:08,759 Speaker 1: shame he's saying shame, he's saying, I'm not angry, I'm 668 00:38:08,800 --> 00:38:09,680 Speaker 1: just disappointed. 669 00:38:10,640 --> 00:38:16,160 Speaker 3: And yet Lloyd survived. Lloyd still exists today. They do 670 00:38:16,200 --> 00:38:20,800 Speaker 3: still sell weird insurance policies ensued David Beckham's legs before 671 00:38:20,800 --> 00:38:24,279 Speaker 3: he retired, and more importantly than that, you know, we 672 00:38:24,360 --> 00:38:26,960 Speaker 3: hear about like the weird kind of funny claims, but 673 00:38:27,080 --> 00:38:32,799 Speaker 3: Lloyd still really matters, still is central to a lot 674 00:38:32,840 --> 00:38:35,080 Speaker 3: of what happens in business in the world. 675 00:38:35,120 --> 00:38:36,200 Speaker 1: I mean, even in. 676 00:38:36,160 --> 00:38:39,040 Speaker 3: March of twenty twenty six, the Iran War broke out 677 00:38:39,040 --> 00:38:41,720 Speaker 3: and suddenly everybody was worried about the strait of horror moves. 678 00:38:41,920 --> 00:38:45,200 Speaker 1: They were worried about specifically oil tankers coming through the 679 00:38:45,200 --> 00:38:47,880 Speaker 1: state or horme moves. And it wasn't just a matter 680 00:38:47,960 --> 00:38:51,560 Speaker 1: of worried about the impacts of a war and the ships. 681 00:38:51,680 --> 00:38:54,479 Speaker 1: They were worried about who is going to ensure these 682 00:38:54,520 --> 00:38:58,440 Speaker 1: ships during wartime And it came down to Lloyd's in 683 00:38:58,480 --> 00:39:01,759 Speaker 1: London in part, yes, because if there's no insurance, the 684 00:39:01,800 --> 00:39:04,879 Speaker 1: ships won't go. And if the ships don't go, that's 685 00:39:04,920 --> 00:39:07,400 Speaker 1: something like twenty percent of the world's supply of oil. 686 00:39:08,600 --> 00:39:12,520 Speaker 3: This is huge and so the British Finance Minister when 687 00:39:12,600 --> 00:39:16,279 Speaker 3: to talk about this with the chairman of Lloyd's, and 688 00:39:16,320 --> 00:39:19,399 Speaker 3: the chairman of Lloyd's told the British Finance Minister yes, 689 00:39:19,920 --> 00:39:23,800 Speaker 3: ships can still be insured through the London Marine War 690 00:39:24,040 --> 00:39:26,920 Speaker 3: insurance market at Lloyd's. 691 00:39:26,600 --> 00:39:30,520 Speaker 1: But it will be expensive, It will be extraordinarily expensive 692 00:39:30,560 --> 00:39:31,480 Speaker 1: to get this insurance. 693 00:39:31,960 --> 00:39:36,520 Speaker 3: Any risk is insurable at the right price. Today's show 694 00:39:36,560 --> 00:39:39,720 Speaker 3: was produced by Gabriel Hunter Chang was engineered by Sarah Bruguer. 695 00:39:40,480 --> 00:39:43,920 Speaker 3: Ryan Dilly is our showrunner and editor. Matt Nielsen is 696 00:39:43,960 --> 00:39:46,959 Speaker 3: our video editor. Because we're on YouTube, check it out. 697 00:39:47,160 --> 00:39:49,400 Speaker 1: If you want more shows about insurance, and we know 698 00:39:49,480 --> 00:39:53,000 Speaker 1: you do, write us business history at pushkin dot FM. 699 00:39:53,040 --> 00:39:54,160 Speaker 1: I'm Robert Smith. 700 00:39:53,880 --> 00:39:56,160 Speaker 3: And I'm Jacob Goldstein. Thanks for listening.