How the market works:
Insuring the Titanic
The placement slip for
Titanic and her sister
ship Olympic
Cover was for 12 months
on hull and machinery,valued at £1million for each
ship; “FAA (Free from AllAverage) absolutely under£150,000” – insurers to pay
only on damage in excessof that sum. The premiumof 15 shillings (75p) wasparticularly low andamounted to £7,500 per
ship. The slip opened on
9 January and by the endof the day brokers Willis
Faber & Co had placed overhalf the risk. Within threedays the slip was complete,with some 12 companies
and more than 50 Lloyd’s
syndicates participatingin the risk.
The centuries-old term
‘underwriter’ was coined at
Lloyd’s, originated by thepractice of having each risktaker write his name under
the total amount of risk he
was willing to accept at a
specified premium.

Visit lloyds.com/titanic to listen to a free
Titanic and Lloyd’s podcast and to see
more Titanic records.

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Welcome to the Lloyd’s market
Lloyd’s is a unique insurance andreinsurance market with an unrivalled
concentration of specialist underwriting
expertise.
Much of the business written at
Lloyd’s is still conducted face-to-face inthe world-famous Underwriting Room,which welcomes more than 5,000 people,
sees £100m in premiums come into themarket and £82.1m paid out in claims
every single day.
Brokers place their clients’ risk
with Lloyd’s underwriters to evaluate,
price and accept the risks. Much of thecapital available at Lloyd’s is provided
on a subscription basis – where Lloyd’s
underwriters join together as syndicatesand where syndicates join together tounderwrite risks. Collectively, Lloyd’s
syndicates insure risks which total morethan £35bn in insurance premiums
each year.
This kind of partnership, combinedwith the choice, expertise and financial
certainty of the market, makes Lloyd’s
the world’s leading insurance andreinsurance platform that develops
relevant, new and innovative forms
of insurance for customers globally.
The market has covered Arctic explorers,
international aid organisations, satellite
launches and taken on major global
risks including cyber, terrorism and theconsequences of climate change.
And on a January morning in 1912,
it insured the Titanic for £1m.

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UnderwritingBroker Willis Faber & Co came to Lloyd’s on
9 January 1912 to insure the Titanic and her sister
ship, the Olympic, on behalf of the White Star Line.
Helped by the fact that the ships were universallyadvertised as ‘unsinkable’, the policy was subscribed
to by all marine underwriters at Lloyd’s and by mostLondon marine insurance companies.
Different underwriters took portions of the risk
ranging from £200 to £75,000, and by 11 January theslip was complete; the Olympic and the Titanic were
fully insured for £1m each. It was the largest marine
risk ever, amounting to 20% of the total £5m capacityof the market at the time. (The total insured marine
losses for all of 1912 came to £6.75m).
Reinsurance
During her maiden voyage on 14 April 1912, the46,000-ton Titanic struck the submerged spur ofan iceberg 350 miles off the coast of Newfoundland
and went down in the freezing waters of the North
Atlantic in just two hours and 40 minutes.
But when Lloyd’s opened for business on 15 April,
the market heard conflicting reports. On the news
that Titanic had struck an iceberg overnight,
reinsurance rates rose sharply and reached 60%
after confirmation from a Lloyd’s coastal signal
station that the vessel was sinking. Shortly after
this, a reassuring message came from the Exchange
Telegraph in New York – Titanic was safely under
tow for Halifax. Rates plummeted to under 25%
on the news, affecting an estimated £50,000 worthof reinsurance.
Reinsurance is the insurance of insurance. Today,
as it did then, it provides a way for insurers and theirclients to protect themselves. If an insurer takes ona particularly large risk, they can transfer part of it
to another insurer. However, insurance companies
can only transfer a portion of their liability and must
always keep a share or an interest in the risk. The typeof reinsurance being traded the day after Titanic
was called “overdue insurance” and it allowed insurers

to sell on their liability if uncertain news wasreceived about a ship.
The purpose of the Lutine Bell, which still hangsin the market today, was to inform the market when
the ship arrived safely at port, or to confirm it aslost. When the bell rang on the afternoon of 15 April,trading stopped.
When the final reports came in, it showedthat more than half the ship’s passengers andcrew had died.
“Divided as it is, the loss of the newest oftrans-Atlantic liners will not fall heavily on any
one man or firm, and today, tomorrow andcontinuously thereafter, Lloyd’s of London
will wager you immunity from loss onany proposition you care to submit.”
From an article published in The Denver Post on
April 16, 1912
ClaimsBecause of the unique risk-sharing structure of
the Lloyd’s market, and financial strength itprovided, White Star was paid in full within
30 days of the tragedy. Lloyd’s picked up a large
share of the hull claim, totalling 20% of the market’s
premium income that year. The life cover sums
were significant, however most of these werecovered by American life insurance firms.
The Titanic left a profound legacy to maritime
safety. Her loss is a reminder that no ship is
unsinkable. Despite being one of the largest
losses of its time, this is ultimately a human story
and one that is summed up by the simple words in
Lloyd’s loss book, dated 16 April, “The loss of life
is very serious”.

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