This episode explores the fascinating world of Lloyd’s of London, the marketplace where the uninsurable becomes insurable. From satellites orbiting Earth to unconventional surplus lines, discover how Lloyd’s shapes global risk management and continues to reinvent insurance for the unexpected.
Lloyd’s of London & Other Insurance Options
What Is Lloyd’s of London?
Lloyd’s of London isn’t a single insurance company—think of it as the world’s most famous insurance marketplace, where multiple insurers come together to pool resources and share risks that are too complex or unusual for regular insurance companies.
Origins as a Coffee House (1688): Lloyd’s started in 1688 at Edward Lloyd’s Coffee House in London. Sailors, merchants, and ship owners would meet there to get the latest shipping news and discuss business. Over time, this small gathering point grew into the main place to buy insurance covering ships and cargoes, especially as global trade expanded.
Growth and Specialization: Lloyd’s developed a reputation for taking on the world’s riskiest business, from insuring ships crossing dangerous waters to underwriting policies for things like satellites, celebrities’ body parts, and large natural disasters. Its ability to adapt made it the center of innovation in insurance, constantly finding solutions for new types of risks.
Formalization as an Insurance Market: 1771: The café syndicates formed a formal association to improve stability and reputation.
1871: Lloyd’s was legally incorporated by the Lloyd’s Act, creating rules and exclusive rights for the marketplace.
Lloyd’s continued to grow, moving into its iconic modern headquarters in 1986, but the heart of the business remained hundreds of underwriters (organized in “syndicates”) competing to cover unusual risks.
Ethical Turning Points: Lloyd’s built trust by paying claims quickly and fairly, most famously after the 1906 San Francisco earthquake when Lloyd’s paid all policyholders in full, even under tough conditions, cementing its international reputation for integrity
Lloyd’s and Surplus Lines: The Connection
What are Surplus Lines?
Surplus lines insurance provides coverage for unusual, high-risk, or hard-to-insure risks that regular (“admitted”) insurance companies won’t cover—think earthquake-prone buildings, coastal homes, or quickly evolving risks in tech and cyber insurance.
Surplus lines insurers are exempt from some state regulations, which allows them to offer flexible and innovative coverage, but also means policyholders aren’t protected by state guaranty funds if an insurer fails.
Lloyd’s Role in Surplus Lines:
Lloyd’s is the largest surplus lines insurer in the US, writing policies through a network of approved brokers. These policies cover risks that US insurers can’t or won’t handle.
In the US, Lloyd’s operates as a “non-admitted” or surplus lines carrier in all 50 states and most territories, following special procedures (through licensed surplus lines brokers).
How it Works:
Syndicates in Lloyd’s compete to underwrite these special risks.
Only Lloyd’s syndicates approved by the National Association of Insurance Commissioners (NAIC) and listed as “eligible alien insurers” can issue surplus lines policies in the US.
US brokers must document why standard insurance wasn’t available before turning to a Lloyd’s surplus lines policy.
When regular insurance companies say “no,” your broker might go to a surplus lines insurer.
These insurers cover special or risky things.
They follow state rules and must prove they’re financially strong.
You can’t buy from them directly. You need a licensed broker.
Why Use Lloyd’s or Surplus Lines? You might choose them if:
You own something rare or expensive.
Your business does something unique.
You live in a disaster-prone area like Florida, California or the Gulf States.
Other insurance companies have denied you.