51 Trial Lawyer • Spring 2023 houses opened in London with each catering to clientele that specialized in a particular trade or industry. Edward Lloyd owned such a coffee house on Tower Street in London. Lloyd’s customers were ship owners, captains, merchants and others who held some interest in the colonial ventures described above. Lloyd’s became a clearinghouse for informal “shipping news,” which included stories of shipwrecks, cargo loss, crew disappearances and expedition failures. From the informal coffee house discussions of those losses, modern insurance was born. Merchant investors would sponsor a colonial venture by hiring and provisioning ships and recruiting people to be colonists. The investors would present their proposed colonial expedition to the venture capitalists drinking coffee at Lloyd’s. The venture capitalists would review the cargo manifests and from the safety of their café-seating would write and sign at the bottom of the manifest to indicate what share of the cargo they would pay for in the event the cargo was lost. This practice, for literal reasons, was called “underwriting.” If the cargo was not lost and the expedition successful, then the venture capitalists would enjoy a proportional share of the profits that flowed therefrom. Single voyages would spread their risk among multiple underwriters, who, in turn, would spread their own risk by underwriting shares of cargo in several different voyages. Underwriters soon found that by investing in many voyages they could practically guarantee enough revenue to outstrip the costs of any realized risks. Through underwriting, Lloyd’s coffee house accelerated the expansion of the British Empire by removing the inherent financial risks of colonial expeditions. History should not forget that (nor should we), in the same way, Lloyd’s accelerated the kidnapping of humans from Africa to be sold as chattel in the Americas. It did not take long for the Lloyd’s underwriters to realize the underwriting business was not limited to shipping. The same investors who underwrote the ship manifests offered their underwriting services throughout other industries and businesses with inherent risks. By the late 1700s, the informality of Edward Lloyd’s coffee shop was left behind, and the underwriters took residence at the Royal Exchange on Cornhill where they formally renamed themselves, perhaps driven by nostalgia, as the Society of Lloyd’s (also known as Lloyd’s of London). Today, Lloyd’s underwriters take residence in the prestigious “underwriting room” of its eponymous, “Lloyd’s of London” office building (a convoluted piece of post-modern architecture reflecting the convoluted reach of the insurance industry), where they likely underwrite as much as a trillion dollars in risk every year. See Corporate Greed p 52
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