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A structural analysis of Lloyd's of London

Long, Robert James (1997). A structural analysis of Lloyd's of London. (Unpublished Doctoral thesis, City, University of London)

Abstract

Lloyd’s is analysed within the framework provided by Kay (1995) on ‘distinctive capabilities’ - architecture, innovation and reputation. An examination of Lloyd’s reveals that a dominant feature of the Society is cooperation between syndicates which occurs via a method of trading - the subscription system - and as a consequence of the rulings of the Council of Lloyd’s.
Lloyd’s has a reputation for innovation and entrepreneurism. This research argues that this is a direct result of four distinctive aspects of its architecture - syndicates are entrepreneurial organisations, the subscription system of risk placement, the unique capital base of unlimited liability Names and the presence of the Central Fund. The research reveals that Lloyd’s is centered on the primacy of underwriting and that the existence of the Central Fund encourages new syndicates to form. The dynamic of a Lloyd’s syndicate is that of a small business - a small number of people working towards a common goal. Moreover the unique capital base, composed entirely of individuals, does not have a voice in the day-to-day underwriting affairs of the syndicates. This allows underwriters complete freedom to underwrite and to change underwriting policy if opportunities arise. The subscription system of risk placement encourages innovative underwriting and ensures information flows between underwriters.
This author suggests that the introduction of a new capital base, limited liability incorporated investors, may stifle the entrepreneurial nature of Lloyd’s underwriters and pose a threat to the subscription system of risk placement. These investors are purchasing Managing Agents, the management structure of syndicates, as well as investing in syndicates. This research suggests that this new capital base challenges the appropriateness of the current regulatory structure and well as posing a threat to the continued existence of the Central Fund. This author recommends that Lloyd’s should abandon self-regulation and should instead be regulated by the Department of Trade and Industry. Furthermore, this author suggests that the Market Board and Regulatory Board should be replaced by a Business Development Board.

Publication Type: Thesis (Doctoral)
Subjects: H Social Sciences > HG Finance
Departments: Cass Business School
Cass Business School > Actuarial Science & Insurance
Doctoral Theses
Doctoral Theses > Cass
URI: http://openaccess.city.ac.uk/id/eprint/20858
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