Who Ended Up Footing the Bill?

[wjw0006]

I've been reading about how many of the "names" at Lloyds ended up paying out extraordinary amounts in the 70's and 80's. I understand that many policies that were active at the time ended up paying out huge awards for asbestos cases decades and decades later....

I cannot seem to follow the money trail though. Who ended up eating all these losses that were not realized until decades later? What if any effect did that have on current rates today?

I searched but could not find any threads on this. If this was posted in the wrong forum then I apologize. Anyone that has been in the business for a while know anything about this?

 

[Josh]

I think you put it in the right section, but I very much doubt anyone here has any real experience with this aspect of insurance. This is mostly sales/marketing with an occasional adjuster. I think this fits under the category of "random actuary trivia" and I don't know that we have (m)any of them here, but certainly not enough to create any amount of discussion on this topic.

I would love to be proven wrong though and see some actuaries poke their heads in!

 

[Rearden]

Probably taxpayers.......

 

[somarco]

Lloyds is not really an insurance company but a syndicate. More precisely, a collection of syndicates.

The "names" are private investors who pledge their wealth against any losses incurred.

Some of the contracts have long tails and claims incurred while the contract was in force will have claims paid months or years after the incurred date.

Others are short tail and will be paid while the contract is in force or within a few months following termination of the contract.

One thing about Lloyds that has always amazed me is they will write coverage retroactively on an event that already happened. I first learned of this through a Willis broker that did this very thing. Maybe 25 years ago a pedestrian skybridge collapsed in (believe this is right) Kansas City. Several people killed.

Even while lawsuits were being filed Willis placed liability coverage on the building owner and/or contractor/engineering firm after the fact.

Similar coverage has been purchased following passenger plane crashes.

 

[GreenSky]

Similar coverage has been purchased following passenger plane crashes.

If I remember correctly retroactive liabililty insurance was placed through Allianz after the MGM burned in 1980.

Rick

 

[VolAgent]

Lloyds is not really an insurance company but a syndicate. More precisely, a collection of syndicates.

The "names" are private investors who pledge their wealth against any losses incurred.

Some of the contracts have long tails and claims incurred while the contract was in force will have claims paid months or years after the incurred date.

Others are short tail and will be paid while the contract is in force or within a few months following termination of the contract.

One thing about Lloyds that has always amazed me is they will write coverage retroactively on an event that already happened. I first learned of this through a Willis broker that did this very thing. Maybe 25 years ago a pedestrian skybridge collapsed in (believe this is right) Kansas City. Several people killed.

Even while lawsuits were being filed Willis placed liability coverage on the building owner and/or contractor/engineering firm after the fact.

Similar coverage has been purchased following passenger plane crashes.

How exactly do you price that? Charge enough to coverage a moderate low and pray it is not a massive loss?

I remember reading into the "names". As I recall, I think they had to attract a bunch of new money and spread around the losses for the chance to profit from new business. Of course, I could be wrong.

 

[somarco]

For a lot of the things they "insure" there are no actuarial tables. The solvency of the syndicate is predicated on the underwriters guessing correctly.

Of course it doesn't always work out.

Lloyds works on the law of large numbers, just like an insurance carrier. Following a few years of higher than expected losses some of the names started purchasing reinsurance, or laying off some of their risk to subordinated risk holders.

 

[wjw0006]

That's what I was trying to figure out....how the heck do you price that?

 

[somarco]

how the heck do you price that?

Combination of experience and luck

 

[Crabcake Johnny]

.......and suing:

Lloyd's of London Sues to Void $17.5M Award to Michael Jackson Estate | The Wrap Media