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On the Brink: How a Crisis Transformed Lloyd's of London Hardcover – 6 Aug 2014
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'Andrew Duguid has written a well-balanced, but at the same time racy and highly readable history of Lloyd's near-death experience and how the market was saved. Duguid is objective, but has used his inside experience well. On The Brink is a very valuable addition to the historical record of the City of London.'
- Sir Howard Davies, Former Chairman, FSA
'This is a book of first-rate importance. It shows how a small number of remarkable men rescued the Lloyd's insurance market from catastrophe- without recourse to a government bail-out.'
- Peter Oborne, Chief Political Commentator, Daily Telegraph
'Andrew Duguid's gripping account of the crisis at Lloyd's is a story of complacency, greed, regulatory failure and overly complex financial instruments. Crises are frequent; most of them are wasted. On The Brink offers a compelling story, based on wide-ranging research, of how Lloyd's showed resilience in dealing with disaster. It is essential reading for anyone interested in the turbulent history of the City of London.'
- Martin Daunton, Professor of Economic History, University of Cambridge
'Understanding what went wrong at Lloyd's was an invaluable lesson for me in what would subsequently go wrong in the global financial system. Andrew Duguid's book makes that experience available to everyone.'
- John Kay, Visiting Professor, London School of Economics
'This remarkable and brilliantly researched book chronicles how greed and shortsightedness brought Lloyd's of London to the brink of collapse in the 1990s, but how in its darkest hour it found new leaders. This small group overcame what many at the time thought were impossible odds to put in place the programme of structural and cultural reform which laid the foundations for the modern day globally important market. But the real value of the work lies in what Lloyd's tells us about today's banking crisis and in particular how the banking industry has so far failed where Lloyd's triumphed in finding new leaders capable of delivering the change in culture which is essential if the industry is to regain public trust.'
- Anthony Hilton, Financial Editor, Evening Standard
A fast-paced, insider account of the near-ruin and amazing recovery of the world's oldest and largest insurance marketSee all Product description
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This part of Lloyd's history is often forgotten in todays well capitalised insurance market and it is good to reflect and learn from the events of the 1970s and 1980s as well as the way the market was saved and has developed since
Any book about this period - approximately 1989 to 1997 - suffers the immediate problem: too detailed, and it rapidly becomes incomprehensible with Lloyd's mad matrix management, list of acronyms, and cast of interchangeable grey men; too broad-brush, and it becomes merely simplistic. Having said that, the best books about this period include some detail of the author's own experiences and, given that Mr. Duguid lurked in the belly of the beast, we might hope for some personal insight. We hope in vain, because what we get is a clippings job - newspapers and Lloyd's brochures - leavened with some unsourced anecdotes.
The real problem of the book is that it is badly under-researched. A prime source for any author of this period ought to be judgments and law reports; in describing the Jaffray judgment, it is fairly obvious that the author has not read it, and simply relies on a report from The Times. This means that he misses other details: prior to Jaffray it emerged that the Committee of Lloyd's had intended the function rooms on the 12h. floor for its Masonic rituals; post Jaffray it emerged (in the Troostwyk case) that Lloyd's had lost the R&R documentation. There is no evidence either that the author has consulted any academic works - dissertations, theses - or even all of the various books detailing the period. Nor does he seem to have interviewed some of the more interesting personalities - Charlie Sturge and Christopher Stockwell, for example.
More seriously, Duguid's distance from, and lack of understanding of, the market allow some ghastly howlers, only the most obvious of which is his description of `surplus lines' as `commercial business unavailable locally'. He misdescribes the appalling s.14 of the Lloyd's Act, 1982. The pen portraits are the standard hagiographic stuff: there is no mention of Alan Lord's starring role in the LIMNET fiasco; Peter Middleton and David Rowland are described as being the best of friends and working closely together - they actually ended-up loathing each other; and Dick Hazell's accounting problem is (disgracefully) ignored.
Rowland himself is an interesting example; his great skill was in selling a pig in a poke, a trick he managed with Stewart Wrightson, Lloyd's, and later NatWest. Nor was R&R unreservedly `a good thing'; it disadvantaged paying Names and working Names - who never had the £100,000 excess required for R&R, were the upcoming generation within Lloyd's and were wiped out - and, perversely, discriminated against the guaranteeing brokers - who supported the institution - in favour of the large international brokers - who broke only a tiny proportion of their business into Lloyd's, and that the dangerous rubbish that caused the problems.
R&R was a combination of cover-up (what in Lloyd's became known as a `foldrug'), payoffs, robbing Peter to pay Paul legerdemain, failure to account, unlawfulness (s.40 of the 1871 Act, s.10 of the 1982 Act), lies, and the usual slapdash incompetence - this last exemplified by Mr. Bradley's inability to pay what Lloyd's owed within its own timetable. The great failure of R&R was that, cobbled together in extremis as it was, it was inevitable that some Names would fall through the gaps. Despite Mr. Duguid's protestations, there was never any attempt by Lloyd's to reach out to these people; instead they were hounded into bankruptcy. Never mind! David became Sir David; Philip Holden made his living bankrupting some 2,000 Names, 15 of whom killed themselves.
What, after this great triumph (if you are Mr. Duguid) or financial version of the Battle of the Somme (everyone else), are we left with? Realistically, Lloyd's did not deserve to survive; as a friend of mine put it, the best thing to have done would be to shut it down as irredeemably corrupt and incompetent and start again. Lloyd's has undergone a `Wimbledonisation' - providing the facilities for foreigners to play. More seriously, it has lost its raison d'etre; discretely hiding its transition to a limited-liability marketplace, it awaits its first big corporate collapse. The entrepreneurism - the days of a man with a new idea supported by Names' venture capital - has gone; instead, remaining Names are squeezed onto `Special Purpose Syndicates' which leave them holding most of the liability and hardly any of the premium. Squeezed by its inflated costs, Lloyd's has abandoned bread and butter business - `personal lines' - for the undefined `global specialty business' - crap which no-one else wants and which got Lloyd's into its mess in the first place; it is an uncompetitive market, paying its second-rate permanent panjandrums and bureaucrats too much. What has remained is a lack of regulation, with the FSA and Lloyd's each pointing to the other as responsible and doing nothing to protect Names.
Duguid also has a bee in his bonnet about what he dismisses as conspiracy theories; but there were certainly numerous cover-ups - Murray Lawrence's three, contradictory, reasons for buying his Outhwaite run-off; the failure to hold a public enquiry into Lloyd's - a forced concession at the fag-end of John Major's government, and swiftly resiled from by the incoming Labour government; and - in a wonderful, makes you proud to be British, moment of farce - David Rowland being handed a blank piece of paper, which represented the Matthews Wrightson board minutes after legal redaction, and cross-examined about what he knew about asbestosis claims.
The conclusion that we should draw from Mr. Duguid's book is quite simple, albeit probably the exact opposite of that intended: that an honest man should be ashamed to say that he has anything to do with the place.
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