ABSTRACT
The London insurance market is a highly sensitive mechanism. The insurance industry needs to keep large liquid resources and longer-term investments to meet both its day-to-day claims and its long-term obligations. The insurance companies grew up alongside Lloyd's but, because of their limited liability status and their subsequent growth, have behaved and developed differently. The foreign element has grown rapidly in some years and has brought new capacity as well as new techniques to the London market. A flood of new foreign companies was encouraged by the combination of the UK decision to join the Common Market in 1973 and the ease with which they could enter the British market. The problems facing the London market are both international and domestic. Risks are increasing rapidly, partly because of inflation, partly because of technological changes. The basic problem arose from the fact that American brokers channel large amounts of business to Lloyd's underwriters usually through London brokers.
