Money Matters

It all started in a Coffee House

For my piece, or the greater part of it this month, I will be taking you back to the 1680’s. Why, you may ask, and with good reason. Basically, because there is only so much one can say regarding the current economic climate; and I thought it might be interesting to have a look at something rather different.

We find ourselves in Old London Town, and in particular, a coffee house. They were very popular then – nothing changes, it seems! This particular house appears in an article in the London Gazette, where the owner was seeking information about five watches that had been stolen. They were believed to have been taken by a rather suspicious gent with ‘black curled hair, pock-holes in his face, wearing an old brown riding coat, and a black beaver hat’. It was, in practice, the first real instance of offering a reward, establishing information about, and considering how a group of individuals could be protected from the effect of differing kinds of loss. Several of the customers were merchants, entrepreneurs, ship owners and their Captains, or other businessmen, who discussed the principles of transferring the risk of a loss from one individual to a group of many (such as the mutual groups were starting to do since the Great Fire of London). The coffee house was an ideal place to gather information about the cargoes and ships that were plying their trade around the world. It soon became the centre of knowledge for all things maritime, and thence the place to go to discuss potential losses at sea, and meet those willing to underwrite such losses. The owner was Edward Lloyd, and he and his eponymous coffee shop, gave their name to Lloyd’s of London.

Whilst there had already been instances of insurance-type arrangements for many years elsewhere in the world, Lloyd’s was the first of its type in the UK. At the very end of 1691, the group of marine underwriters moved to Lombard Street where they furthered their trade and then moved, in 1771, to the Royal Exchange, where they were officially incorporated as The Society of Lloyds (although Edward Lloyd had died many years before, he was never forgotten). The Society grew and grew despite many setbacks, including the San Francisco earthquake; claims under Employer’s Liability policies for asbestosis compensation; and a host of storm, typhoon and hurricane claims (not to mention many notorious shipping and oil-rig losses) to be the massive concern that it is today. Last available figures show a premium income of some £30billion. There is practically no risk that cannot be covered – within reason – and at the relevant premium, and risks vary from material damage, liabilities, life assurance, health and medical cover, and even movie stars’ legs! More bizarrely, but along the same lines, Rolling Stones guitarist Keith Richard’s fingers; Egon Ronay’s taste buds; Ken Dodd’s teeth; a variety of well-known vocal chords; and, for a particularly confident comedy theatre group, a policy against the risk of a member of their audience dying of laughter.

Well, there you are, something different! Should you want a few words about the current investment climate, I think many markets seem to be of average to above-average value. It wouldn’t stop me making regular contributions, but I would be slightly reticent about putting a lump-sum in the market. I’m not a doom-monger, but I think it is getting more difficult to find good value without the associated risk; and there are plenty of geo-political factors that may upset markets, despite there being many opportunities at company level.

Enough of this: roll-on Christmas. Let’s have some nuts (as an old friend used to say). I’ll be back then.

David Foot

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