CITY AND SUBURBAN
The man with the right idea about insurance Edward Lloyd, meet Samuel Pepys
CHRISTOPHER FILDES
The man with the right idea was Samuel Pepys. Because he was plugged in to the City, he had heard that a certain ship was overdue. Because he worked in the Admi- ralty, he knew that she was safe: 'I went like an ass to Alderman Badmen and told him. Now what an opportunity I had to have concealed this and made an insurance and got £100 without the least trouble and dan- ger in the world.' Then Edward Lloyd opened his coffee house and business con- tinued on these lines for most of the next three centuries, with risks being run by people who knew what they were undertak- ing or at least thought they did. It worked rather well, until Lloyd's numbers multi- plied five times in two decades, as new members flocked in who made no pretence of knowledge. They left that to the agent who got them on the syndicate which was run by the underwriter who ran the unlimit- ed risks with their money. Meanwhile they enjoyed the tax advantages or even the social cachet, and of course the annual cheque, which they had earned by so clev- erly making their money work harder. That cant phrase fooled them. In fact they were making their money work twice, doubling up on two horses instead of backing one. As a merchant banker, Sir David Berriman should have known better, but he told the House of Commons Treasury Committee how he joined Lloyd's, hoping in a vague way to increase his income by allowing his assets to work twice — a hope that went unfulfilled: 'Like the majority of names, provided you receive a cheque, however small, you say "Thank God, this will help to pay the school fees" and then move on to the following year. It was when the losses started flowing through that I took the atti- tude that I am damned if I am going to pay out this money unless I know why it is hap- pening.' By then it was too late. Now Lloyd's has sent him and his fellow suffer- ers its latest final offer, and they must decide whether Lloyd's has a future and whether they want to be part of it.
Newton's laws
DAVID Newton means to stay on, but I cannot say that he sounds enthused. He is a consultant to Lloyd's members and sends them long, thoughtful reports. Now he tells them: 'I see no compelling reason to contin- ue to underwrite in the hope of excellent short-term returns.' Lloyd's three fat years are over, returns from now on will be only reasonable, and that may not be good enough to cover the risk of catastrophic loss- es. In any case, the new Lloyd's would be a different market where most of the risks would be run by specialised companies. I am not sure that it will need that show-off building or the whole cumbrous and expen- sive apparatus that supports or impedes the market now. I am not even sure how much it will need members. 'The traditional names', so Mr Newton says, 'will want tax efficiency and double use of assets' — but they had those last time round and, as an earlier chairman told them, they might have joined a tax haven but they found themselves in the insurance business. I can imagine a Lloyd's where a few individuals close to the market stand ready to run risks on their own account. I cannot see a future for a Lloyd's whose members wait for their traditional cheque in the traditional Old Rectory until they find out that they have lost it. Markets live by information and a good market is made by people who, like Pepys the under- writer, know what they are doing.
Whoops, Chancellor
A HICCUP in the markets and a slight embarrassment for Kenneth Clarke. He cut the price of money and found that he had to pay more for it. Oh, well, that's life for a Chancellor. He can more or less decree what money costs from day to day, but not what it costs if you want to borrow it for ten or twenty years, as he does. The rate he must pay for his regular fix of £600 million a week has gone up. Some of the doubts that I listed a week ago have now become more audible. Chancellors who believed in sound money (I was saying) would not now be in such a hurry to get interest rates down, and when the money supply went over the top of the gauge, that would worry them. It worries Tim Congdon, the monetarist sage of Lom- bard Street. Here we go again, says Tim policy relaxes, just as the money supply is overshooting, and with a general election near enough to make it tricky for the Chan- cellor to tighten up. Where does that take us? Where it took us last time — sooner or later, to higher inflation. The markets fear so too, which is why they are surcharging Mr Clarke for his money.
Everybody out
SPEAKING as my own employer, I shall have no trouble with the Working Time Directive, now being railroaded through from Brussels in the guise of health and safety regulation. In any week, once I have worked 48 hours, I shall stop. Any instruc- tions to the contrary that I may give myself will be ignored. This will be explained to editors who wonder why there are large holes where they expected to see articles. If they complain I shall set the inspectors on them. No contractual obligation on my part can override a European directive. If need be I shall pay myself off, with suitable com- pensation, and hire someone else to get on with my work. Or I might get a job writing directives, but not to the point where they impair my health and safety.
Send in the clones
THERE is nothing new about commercial cloning, except that it has got as far as sheep. Years ago, the directors of Unilever told us they were cloning palm trees. All grown from a single cell in (I think) Welwyn Garden City, their uniform planta- tions swayed in the tropic breezes like a chorus line. We expressed polite interest and asked whether Unilever had now got as far as cloning its directors. The directors shook their heads in perfect uniformity. Now that Unilever plans to be run by a seven-man executive committee, the obvious solution presents itself.
Less equal than others
DOUGLAS Jay must have been the last survivor of the Times's City office in the days of the gold standard. His memoirs record how the City pages rose to the occa- sion when the pound came off its perch. No by-lines in those days, of course, but a well- turned note By Our City Editor, the weighty Mr Mill: 'The expression "equality of sacrifice" has an ominous ring for the investing classes.'
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