Great Fire to a Burgeoning Market: History of Lloyd's

For hundreds of years the insurance market known as Lloyd's of London has played a notorious role in the world of risk and finance.

To understand how this market started, podcast producer Zach Ewell spoke with Geraldine Morgan, a history enthusiast who gives tours in London England around the history of Lloyds and insurance. Morgan takes us on a tour from the great fire of London of 1666 to the establishment of Lloyd’s Coffee Shop.

 To learn more about Morgan's tour you can visit her website. 

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Zach Ewell: 00:04

Welcome to the Leaders Edge podcast. I'm Zach Ewell, content producer here at Leaders Edge. For 100 of years, the insurance market known as Lloyd's of London has played a notorious role in the world of risk and finance. Founded in the late 17th century, Lloyd's for short has seen it all and still stands to this day. To understand the history and impact that Lloyd's has had on the world of insurance, I spoke with Geraldine Morgan, a history enthusiast who gives tours in London, England around the history of Lloyd's and insurance.

Zach Ewell: 00:39

Geraldine herself has also previously worked within the industry. From Great Fires to Candlelit Auctions, what follows next will be a brief look into the tour Geraldine gives exploring the history of risk in London.

Geraldine Morgan: 00:58

So I start the tour at the monument, and the monument, it's actually called the monument, commemorates one of the biggest events in the history of the city of London, which was the Great Fire of London of 1666. And the reason I started there was because this event had such an impact on the city. I mean, the city had to be it was decimated. It was a fire that run for 4 days. The the extent of the damage was so vast that that that the city had to be rebuilt completely.

Geraldine Morgan: 01:33

And so resulting from that, a man called Nicholas Barban, he was an economist and a property developer and an entrepreneur as well of of the day. He thought up the idea of fire insurance, and this wasn't this wasn't a concept that had been known in in the past within within London or within certainly within the country. And he also set out what's called the fire office, and that was basically the first form of fire insurance and property insurance following that file. So I thought that would be quite a good place to start. But, also, following that, a guy called Edward Lloyd came from Canterbury and set up his first coffee shop on Great Tower Street, which is along the Thames.

Geraldine Morgan: 02:24

And and that is really where the Lloyd's story begins.

Zach Ewell: 02:28

So we went to the first monument. It's you said it's literally called the monument?

Geraldine Morgan: 02:33

That's right.

Zach Ewell: 02:33

That's funny. And then where are we off to next?

Geraldine Morgan: 02:36

I'll talk a little bit about the beginnings of fire insurance, and then I'll talk about how in parallel, Edward Lloyd of Ryerson Canterbury sets up his coffee shop and and how he's there for about 3 years. So he's there from about 1688 to 1691. And when he's when he's in this coffee shop, he starts getting a following, I guess, for people within the marine and maritime industry because and a lot of that is is is where his coffee shop is based. It has a lot to do with the strategic placing of his business because he's on he's on the Thames, the River Thames, and he has that kind of direct exposure to people who were working in the marine industry, dockers and, you know, ship owners and, sailors and merchants all frequent his coffee shop. And he also used to send a waiter down to the docks, and he would get information of ships that were leaving and coming into dock.

Geraldine Morgan: 03:46

And he would share that information with the customers in his coffee shop. So I think I set the scene by sort of saying, you know, here comes this man. He he opens a coffee shop. He suddenly he he picks up this opportunity to share information in the maritime industry just because of by virtue of the fact of where his coffee shop's based, and he capitalizes on it. And he his business grows.

Geraldine Morgan: 04:13

The next, I guess, heart of the walk is we then move to where his second coffee shop was based. So he he he doesn't stay on Great Tower Street. Once he starts building up his following and starts, I guess, making money, he he's able to move up in the world. So we then move to Lombard Street. And Lombard Street is, I guess, about 3, 4 minute walk from the monument.

Geraldine Morgan: 04:41

And Lombard Street is called Lombard Street after the Lombardi region of Italy, which is, where a lot of the the merchants at the time were based. But the merchants had come from that area and and had been on that street from about 11th or 12th century. And they used to sit along benches that were called Benco, and and that's where the word bank came from. Oh, fascinating. That's so interesting.

Geraldine Morgan: 05:11

Yeah. And that particular area, Zach, that area of, Longbarge Street is I guess you're moving further into the city, into the heart of the city, and that really is the heart of the financial district as as we know it today. And it has always remained so, you know, for for millennia, really. It has always been a place of, I guess, money lending and and merchants and of trade. And, really, I think Edward Lloyd was very smart in making that move and moving his coffee shop there because he was really amongst the movers and shakers of the city at that time.

Zach Ewell: 05:55

And, Geraldine, why a coffee shop?

Geraldine Morgan: 05:57

Well, the coffee shops had really grown in popularity from around, I guess, the mid 1600, and the very first coffee shop was opened by in the city by a man called Pascasse Rosae, Pascasse Rosae, and it's believed he came from either Greece or Turkey. And he opened up the first coffee shop, and I guess it's just like a lot of things. It was just a trend that really took hold. And I think what's really interesting is when you get trends and fashions that die out and they come back, and when you think about, you know, for years, coffee has never really been popular in the UK, but it's only in the last 15, 20 years that I'm aware of that there's been a real resurgence of coffee shops. And certainly in the last 10 years, the demand for sort of the flat white and the kind of, I guess, the more artisan style of coffee shop has become really popular in the UK.

Geraldine Morgan: 07:04

But prior to that, I mean, we were a nation of tea drinkers, really.

Zach Ewell: 07:08

Tell me about how people and businessmen who were at Lloyd's coffee shop, how they would essentially conduct their business as I understand that they had candlelight auctions?

Geraldine Morgan: 07:18

Well, I I think what I'd really like to explain as well is how the actual business of underwriting came about within his coffee shop. So if you imagine you've got lots of coffee shops in the city of London and actually every coffee shop had its own niche of business. So you would have had, for example, the Jerusalem coffee shop, which would have been for members of the East India Company, and then you would have had Jonathan's coffee shop, which would have been for the stockbrokers. And then Edward Lloyd's coffee shop was known for, underwriting of insurance, marine insurance in particular. So people would frequent a coffee shop based on the particular business that they wanted to do.

Geraldine Morgan: 08:01

So how underwriting came about in his in his coffee shop was he would rent out kind of like a booth. And the best way to describe this, Zack, is, you know, if you go into a burger bar and you see these booths and you, you know, like a 1950s style diner, if you like. He had something very similar in his coffee shop. So merchants would go into his shop, and they'd be looking to have meetings with other merchants in order to get their policies underwritten for their, you know, to get their vessels insured or to get their cargo insured. And they would present the policy, which would have just been a handwritten piece of paper at the time, to another merchant.

Geraldine Morgan: 08:46

And the merchant would agree to, cover a particular loss, and they would write their name underneath the the handwritten policy agreement. And that's how the name underwriter came about, insurance underwriter. So when you think about it, underwriters were actually merchants at the time. It was always marine insurance as well that they were underwriting. So Edward Lloyd really became synonymous with insurance underwriting in in marine in the marine field business.

Geraldine Morgan: 09:24

And the booths, if you like, became known as boxes, And that's still maintain that name to this day. So we still have underwriters sitting at boxes in Lloyds of London. When Edward Lloyd had moved his coffee shop to Lombard Street, He's starting to grow his business now at this point, so he's doing quite a few different things. He's also, he's he's also setting up, like, a newsletter Oh. Where he shares shipping news And and as well as the underwriting part of his business and as well as the the the providing of coffee to his customers, he also runs candle auctions.

Geraldine Morgan: 10:03

Now how this worked is you light a candle and somebody wanting to auction maybe a ship or some cargo that they couldn't get rid of. Edward Lloyd would light a candle, and the person that had put in the last bid before the flame extinguished would win the auction. This was an age as well where people probably weren't really that scared of fires because it happened quite a lot in the city. You know, when you think about the sort of the flammable materials that the buildings were made of, especially in the great fire of 16 66, all the buildings at the time are made of timber. Okay.

Geraldine Morgan: 10:51

Timber and thatch. And it it was said that somebody looking out the window at the time when the great fire was breaking out wasn't that concerned because fires happened all the time. And I suppose as well we when you think about it, there was no electricity. So having candles in a building was quite normal.

Zach Ewell: 11:11

It's fascinating too that connection, you know, you start your, tour off with going to the monument and speaking about how the Great London Fire essentially created a need for the insurance, industry within London. And then here we have, you know, all of these businessmen, huddled inside this coffee shop using fire as a determinant to, figure out who gets what, essentially.

Geraldine Morgan: 11:36

Yeah. When you think about how things progress, you know, we've got eBay now for that. We don't need to do a candle auction. After we've gone to the second coffee shop, I talk a little bit about how the coffee shop is evolving, how the business is evolving, and we also, talk a little bit about the end of Edward Lloyd's tenure at that point because he he dies in 17/13, and he passes his coffee shop down to his daughter. And it runs through the family for a couple of generations where it eventually comes out of the family.

Geraldine Morgan: 12:15

But the final coffee shop owner is a man called Thomas Jempson, and and they did something that was quite nice. They remained quite sympathetic to the Lloyd's brand, and they kept the name. And so, sort of, around, I guess, the 17 forties at this point, the the the era of the coffee shop is really coming to an end as a place of business. And so what happened in 17/45, there was the Marine Insurance Act. And that came about because people had started to kind of, use underwriting as a form of gambling, and the coffee shops had had come become a little bit salubrious.

Zach Ewell: 12:58

Oh.

Geraldine Morgan: 12:59

And there there had been people gambling about all sorts of different things, like when the king would die. And there might be a kind of, a merchant that might not be that honest, that would have maybe a ship that wasn't that seaworthy, that would want to get it underwritten in order to get a claim, for example. The next part of the tour is talking about how a group of underwriters came together, a group of, kind of, loyal, guests, if you like, of of the the Lloyd's coffee shop, and they they formed their own group. And they decided that they were gonna part ways with the Lloyd's Coffee Shop, and they were gonna set up their own coffee shop. So they set up the north the new Lloyd's Coffee Shop on an alleyway just across the road from Lombard Street called Pope's Head Alley.

Zach Ewell: 13:52

Uh-huh.

Geraldine Morgan: 13:54

And then they they were there for probably about 5 years or maybe even longer. And then they formed their own society called the Lloyd Society. So by this point by this point, you're kind of moving out of a business is kind of forming out of the coffee shop and then moving away from from the actual coffee shop as as a base to do business. So the next stop is we go to the Royal Exchange, and the Royal Exchange is where the Lloyd Society moved to in 17/74. And this was really the very first office of its type for Lloyds, the Lloyds of London.

Geraldine Morgan: 14:38

So they've moved away from the kind of ad hoc enterprise of, I know I I'll go and see that underwriter who I'll find him in Lloyd's coffee shop to, more of a permanent base where underwriters would be there all day to meet other merchants coming in wanting to get their risks insured. So what we do after that part of the tour is we walk down to there there's a couple of really lovely alleyways as well that I take my my guests on. So there's change alley, and then there's Saint Michael's alley. And when you walk up these alleyways, it's like walking back in time to the kind of Dickensian period. So you have, there there's a pub there called the Georgian Vulture.

Geraldine Morgan: 15:31

And the Georgian Vulture, for any of your readers or subscribers that are Dickens fans, the Georgian Vulture is mentioned in the Pickwick papers and it's an old pub that Charles Dickens used to go into. So I take my guests there, and it's just something that's really cool because there's all these lovely little alleyways. And it's it's like and you get these kind of, these old fashioned lamps that have been street lights have been there for 100 of years, and it's like walking back in time. And and I think that's what I love about the city of London is that you've got all these you've got pretty much the original footprint of the city. It hasn't really changed for 100 of years.

Geraldine Morgan: 16:14

I mean, other than really these new buildings that have been built up around it, the the actual footprint of the city has always stayed the same. It just gives a little bit of intrigue and mystique, I guess, to the city. And lots of people say to me, I didn't even know this was here. I said this to someone the other day, actually. When you think Lloyds of London, really, it's unique.

Geraldine Morgan: 16:38

There's nowhere in the world like it. And the reason it's unique is because of its backstory and its history. I mean, we've got 300 years worth of evolved expertise, really, in every different class of business that you can imagine. I mean, obviously, it started with marine insurance, but then sort of going into the the early 20th century, we started moving into more non marine products like aviation and, travel, and obviously now, more recently, space. So, I think it's the expertise and it's the history that has made the Lloyd's of London so, unique in what it does.

Geraldine Morgan: 17:20

And it's also the the gold standard, if you like, of insurance policies. And and I think that's what makes it popular on a global stage.

Zach Ewell: 17:31

Geraldine Morgan continues to give ticketed tours in London, England. We will link her website in the description of this podcast below. For more podcasts by LeadersEdge, visit leadersedge.com, or subscribe to our podcasts on Apple Podcasts, Spotify, Amazon Music, or SoundCloud.