ABSTRACT
Th e near collapse of the 300 year old Lloyd’s insurance market in the early 1990s provides another interesting example of a major upheaval in the world of insurance. A combination of many years of injudicious underwriting, an exceptional number of major catastrophes in a short space of time, and internal management problems caused Lloyd’s collectively to make huge losses over the period in question (around GB£8 billion between 1988 and 1992) bankrupting many underwriting members and bringing Lloyd’s close to insolvency. In the end, Lloyd’s did not fail. Rather, it recovered, restructured, and reinvented itself, regaining its leading place in the world insurance market for large, unusual, extra-hazardous, and internationally traded risks. However, had it occurred, the failure of Lloyd’s would have dealt a hard blow to the world insurance system by curtailing the supply of cover for the sorts of risks described above, which would have caused signifi cant economic disruption.
