Quaint old British custom
LLOYD'S always argued (and wrote into its own Act of Parliament) that the unlimit- ed commitment of its members was one of its strengths. I have long thought it a weak- ness and a delusion — one of those quaint old British customs so widely envied that nobody copies it. When that commitment must be called, Lloyd's is not going to pay its mega-bills out of a quick sale of Old Rectories and Old Masters. That lesson is now being learned the hard way. Lloyd's needs a capital base appropriate to the risks it runs, and if the risks are innovative and specialised, all the more reason for the cap- ital to be orthodox and solid. The policy- holders pay their premiums because they know that disasters can happen. When they do, insurers like the Royal and the mem- bers of Lloyd's lose a great deal of money. That is not a scandal. If the policy-holders did not get their money, that would be a scandal. At Lloyd's, that has not come into question — but its business needs a better foundation than an elegant hole in the ground.
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