The Insurers Who ALWAYS Paid Out: The Lloyds of London Story Part I

Summary

Business History Podcast

Episode: "The Insurers Who ALWAYS Paid Out: The Lloyd's of London Story Part I"

Hosts: Jacob Goldstein & Robert Smith

Release Date: April 8, 2026

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Episode Overview

This episode embarks on a lively, in-depth journey through the early history of Lloyd’s of London, the famously eccentric insurance marketplace that helped define the business of risk for 300+ years. Starting from a humble coffee house in 17th-century London, hosts Jacob Goldstein and Robert Smith explore Lloyd’s evolution from a penny-a-cup cafe for seafarers to a global force in marine—and later, disaster—insurance. Expect tales of Enlightenment-era coffee culture, betting on shipwrecks, brand-defining catastrophes, and the uncomfortable history of insuring the slave trade, all told with humor and historical rigor.

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Key Discussion Points & Insights

1. Insurance as a Worldview

• Insurance is foundational to the modern world
  • “You couldn't have the modern world without it... Container ships, satellites, concerts—none of that would happen if you didn’t have insurance.” (Jacob Goldstein, 04:54)
• It represents the belief that with enough data, risk is manageable
  • “The insurer says to you, 'Show me 1 million people... I can tell you, to a pretty good approximation, how many of them will die next year.'” (Jacob, 04:08)

2. Origins in London’s Coffee House Culture

• Coffee houses as incubators for intellectual exchange
  • “Coffee and ideas, they go together... They called coffee houses ‘penny universities.’” (Jacob & Robert, 05:43-05:44)
• Edward Lloyd’s coffee house becomes a shipping & insurance hub
  • "Edward Lloyd was not a merchant or shipping guy... but because of the location of his shop, it became this central hub for shipping." (Jacob, 06:30)
• Lloyd's List: The OG shipping newsletter
  • Lloyd's newsletter tracking shipping—now Lloyd's List, still exists (08:15–08:28)

3. How Insurance (and the ‘Underwriter’) Worked

• The ‘underwriting’ tradition
  • Ship owners would write down risk; wealthy patrons would “subscribe” a portion and sign beneath—hence “underwriter” (10:02–11:01)
• Insurance long predates Lloyd’s: Babylonian ‘bottomry’ loans
  • “The earliest insurance we know comes from the Code of Hammurabi, 1750 BC, Babylonian legal code… known as bottomry.” (Jacob, 11:32)

4. Lloyd’s Becomes a Speculation Market

• From covering risk to betting on outcomes
  • “People start taking out insurance policies on voyages they have no stake in... basically betting.” (Jacob, 14:02)
• Early prediction markets: life insurance on strangers, bets on shipwrecks
  • “They even start taking out life insurance policies on random people, like some guy on trial for treason…” (Jacob, 14:24)
• Value and issues of such markets debated—information sharing vs. ‘gross’ speculation (14:59–15:15)

5. Creation of ‘Society of Lloyd’s’

• Reputation matters: Breakaway from gamblers to form the reputable Lloyd’s
  • “You have to trust that [the insurer] will give you the money... reputation is profoundly important.” (Jacob, 19:24)
• 1769 split, new coffee house, later the 'Society of Lloyd’s', laying down rules and structure (19:58–21:47)
• John Julius Angerstein, lead underwriter, becomes central figure; innovations in risk pricing
  • His policies were a “gold standard”—other underwriters wanted to follow his lead (21:57–22:11)

6. Defining Moments: The Sinking of HMS Lutine

• Big, brand-defining payout: The Lutine disaster
  • Ship carrying gold/silver sinks; Lloyd’s, led by Angerstein, pays out in full (23:55–24:35)
  • The recovered ship’s bell becomes a symbol—one ring for a lost ship, two rings if safely arrived, building Lloyd’s mythos (25:10–25:42)

7. The Dark Side: Lloyd’s and the Slave Trade

• Lloyd’s underwriters insured ships and enslaved lives during the peak of the transatlantic slave trade (26:49–27:26)
  • Lloyd’s has since formally apologized but not offered reparations

8. Expansion Beyond Marine Insurance: Cuthbert Eden Heath

• Big Leap: Insuring Non-Marine Risks
  • “Any risk is insurable at the right price.” (Heath’s motto, 32:14)
  • First to underwrite burglary insurance (1889): “Why not?” was his attitude (31:31–32:02)
  • Used detailed data & probability for new risks—studying hurricanes, smallpox, and even Zeppelin bombings (32:14–35:28)

9. Reputation Cemented: 1906 San Francisco Earthquake

• Most remarkable moment: Heath’s telegram
  • “Pay all our policyholders in full, irrespective of the terms of their policies.” (Telegram read aloud, 37:32)
  • Built Lloyd’s global reputation for reliability—contrast with penny-pinching insurers (37:55–38:20)

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Notable Quotes & Memorable Moments

• “Insurance is a way of thinking about the world…It says the world is fundamentally predictable.” (Jacob, 04:08)
• “Coffee and ideas—they go together.” (Robert, 05:43)
• “The way Lloyd’s used unlimited liability will shock you.” (Jacob, 03:30)
• “That insurance was something known as bottomry…” (Jacob, 11:35)
• “It’s kind of amazing not only does it work but it comes to dominate marine insurance…most important marine power on the planet.” (Jacob, 25:01)
• “Any risk is insurable at the right price.” (Cuthbert Heath, quoted by Jacob, 32:14)
• “Pay all our policyholders in full, irrespective of the terms of their policies.” (Cuthbert Heath’s telegram, 37:32)
• “You do not see this kind of telegram very often today.” (Robert, 37:51)

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Timestamps for Important Segments

| Timestamp | Topic | |-----------|-------| | 03:38–04:54 | What is insurance, why it matters for the modern world | | 05:43–07:18 | Coffee houses and the emergence of Lloyd’s | | 08:15–09:45 | ‘Lloyd’s List’ and commerce as information exchange | | 10:01–11:01 | Origins of the word ‘underwriter’ and early insurance mechanisms | | 14:00–15:15 | Emergence of prediction markets at Lloyd’s | | 19:19–22:11 | Foundations of ‘Society of Lloyd’s’ and John Julius Angerstein | | 23:50–24:35 | The HMS Lutine disaster and Lloyd’s pays out | | 25:10–25:42 | The Lutine Bell and its lasting symbolism at Lloyd’s | | 26:49–27:26 | Lloyd’s and the transatlantic slave trade | | 30:30–35:28 | Cuthbert Eden Heath—expanding into non-marine, data-driven insurance | | 36:49–38:20 | 1906 SF Earthquake—Heath’s ‘pay all claims’ telegram and Lloyd’s global reputation |

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Tone & Style

The hosts blend wit and friendly banter (“Smash that subscribe button!” “Yes, we have videos on YouTube”, 03:40/39:18) with clear-eyed historical analysis. They don’t shy away from darker topics, handling Lloyd’s connection to the slave trade with both candor and context. Their playful, deeply informed style makes the financial and actuarial history not only accessible, but genuinely fun.

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Summary Takeaway

Lloyd’s began as a caffeine-fueled meeting ground for ambitious mariners and financiers, ultimately defining new ways of managing risk and building trust in the unpredictable—sometimes for good, sometimes for ill. Its legacy is a story of data, daring, and reputation that continues to shape global business, setting the stage for even wilder risks to come in the 20th century (to be continued in Part II).

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Next Episode Teaser:
The story continues: Lloyd’s insures rockstar voices, nuclear plants, satellites, and nearly brings down the global economy through risk run amok. Don’t miss Part II.

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Contact: [e-mail]

Transcript

[A]

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[B]

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[C]

Pushkin. Too quick?

[D]

No, it was perfect.

[C]

Push kit.

[D]

Stop. You got it. Robert Smith. Robert Smith. Robert Smith.

[C]

Yes, sir.

[D]

Get excited.

[C]

Yes, sir.

[D]

Because we're doing Lloyd's of London. Yes, we're going 300 plus years. We're going from Edward Lloyd, the man selling coffee for a penny a cup in the 1680s into the 20th century when Lloyds insured Bruce Springsteen's voice in nuclear power plants and satellites. All the way up to the moment when Lloyd's almost took down the global economy with it.

[C]

Too much for one show.

[D]

So we're Doing two. I'm Jacob Goldstein.

[C]

I'm Robert Smith. And this is Business History.

[D]

About the history of business. Today is the first of two episodes about Lloyd's of London, one for each L. Nice. It's the llama of insurance. The Lloyd story includes, but is not limited to the Enlightenment, coffee war, prediction markets, earthquakes, the Titanic, asbestos, Pink Floyd, and the Queen consort of England, May she reign forever. Also.

[C]

What? There's more.

[D]

I wrote a clickbaity headline for our nerds. The way Lloyds used. Unlimited liability will shock you.

[C]

Like, like, like.

[D]

Subscribe. Smash that subscribe button. Robert. Before we get into the Lloyd story, let's talk about insurance for a minute. As we have talked about insurance on many occasions over many years.

[C]

I love insurance. I love insurance because it has all of the global forces of economics, all of the incentives, the risk. It all boils down to one industry that writes in very small type.

[D]

The smallest, the finest of the prints.

[C]

The finest of prints.

[D]

And really, I think it's not overstating it to say insurance is a way of thinking about the world, right? It's a worldview. And it says the world is not fundamentally random and chaotic, right? It's fundamentally predictable. Given enough data, enough numbers, right? The insurer says to you, show me 1 million people, give me some basic information about who they are, how old they are, et cetera, and I can tell you to a pretty good approximation, how many of them will die next year.

[C]

And more than that, if an economy is gonna grow, if the world's gonna grow, people have to take risks. And that's scary. You know, you have a lot of hope, a lot of optimism. You need someone in the room to say, I did the math. This is exactly what the risk is, and I can take some of that risk from you.

[D]

Yeah. And truly, you couldn't have the modern world without it, right? You couldn't have container ships without insurance. You couldn't have satellites, you couldn't have a concert at a stadium. Non that would happen if you didn't have insurance. And clearly, I'm going to say clearly, the most interesting story in the history of insurance is the story of Lloyd's. Ready, here we go. Buckle up. As they say on the AI podcast, it starts in the late 1600s in London, and at the time, London's hottest clubs were coffee houses. Coffee was new to London at the time, new to England. Just been there for a few decades. And, you know, it's this very exciting moment, right? It's the enlightenment. It's the moment when ideas are starting to spread and to grow. And coffee is really central to that.

[C]

Coffee and ideas, they go together.

[D]

Ay. In fact, they called coffee houses penny universities. Cause for a penny you could go to the coffee house, get jacked on caffeine and learn from the people around you. And different coffee houses, kind of then as now, but I think even more had different sort of intellectual specialties, like the clergy hung out. At the coffee house near St. Paul's there was one on Exchange street where the brokers hung out that actually ultimately became the London Stock Exchange. There was another one where the guys from the Royal Society, including Isaac Newton, was like inventing calculus hung out. And then down by the Thames, by the river, by the Customs House, there was Edward Lloyd's Coffee House, which was

[C]

a place where captains could go. Right. And people who worked on ships.

[D]

Yes, yes, naturally, they just went there because that's the coffee house in the neighborhood. Edward Lloyd was a. You know, he was not a merchant, he was not a shipping guy. He was the son of a. Of a knitter, framework knitter. Decided to get into the coffee business in the 1680s. And because of the location of his shop, it became this central hub for shipping. And it did well. And a few years after he opened the shop, he moved up to Lombard street, which is kind of like the Wall street of London. So now he's at the nexus of shipping and finance, which is a good nexus to be at in London for any time from 1680 to what, let's say 1914. Right. It's what is going to build the British economy. Finance plus shipping. And Lloyd's is right there.

[C]

And it's exactly what you need for the birth of insurance. Information and money coming together.

[D]

Yeah, and the information piece is really central and. And Edward Lloyd saw it, right. He wasn't an insurance guy, but he understood that that's what people were coming for. His coffee house was just a room, you know, 40ft by 50ft, sand on the floor, big tables. But Lloyd started consciously adding information to the mix. He actually started publishing just a little newsletter we would call it today. It had two sections here. I wrote them down. Say, read, read the names of the sections. I don't know.

[C]

Okay, the sections are, number one, ships arrived at and departed from several ports of England as I have account of them in London.

[D]

One, domestic news.

[C]

An account of what? English shipping and foreign ships for England I hear of in foreign ports.

[D]

Two, foreign. And I love that both of them are like, I don't know, it's what I heard.

[C]

It's Gossip. It's just what we do. We think ships are coming.

[D]

A few decades later, it morphs into something called Lloyd's List, which is, in fact, still published today. You can go to lloydslist.com here, do it. Tell me what you see.

[C]

I'm pulling it up, I'm pulling it up. And not surprisingly, it's all about the Middle East. Ooh, just brought me up a dismiss. I don't want to register. Fallout will ripple across globe amid Strait of Hormuz doomsday scenario.

[D]

So this is a version of an account of what English shipping and foreign ships for England I hear of in foreign ports. So Lloyds is bringing the information into the coffee house. The merchants are there, the sailors are there. He actually starts having auctions at the coffee house. And the particular way they do it is pretty delightful. They called them candle auctions. So say they were auctioning a ship, which was a thing they would auction off there. They would light a candle, the bidding would begin and it would continue until the candle burned all the way down and out, which is drama that I love. Like, presumably everybody's looking at the candle, you know, when it's going to end,

[C]

and they're trying to decide to come in at the last minute with a slightly higher bid. Right before the candle goes, you wonder

[D]

if somebody makes the bid and it's like, so Lloyd's is just a coffee house where these people are hanging out, where there's information and organically, insurance starts happening there. You know, a ship owner wants to protect himself against loss if the ship sinks or gets captured by pirates.

[C]

He tells his coffee mates, oh, I have this great opportunity, but, you know, I don't know, if I lose this ship, I lose everything. I'm probably not going to take this tremendous financial opportunity. And someone comes in and says, well, I can help insure your ship for you.

[D]

Yes.

[C]

I can share the risk.

[D]

Yes. And insurance is a thing by this point. They're not inventing it at Lloyd's. And the way it basically works is someone with a ship will write down on a piece of paper, you know, the value of the ship or the cargo, the nature of the voyage. That's basically it, right? Like, what is it? How much is it worth? And we'll take that piece of paper around to the tables at Lloyd's, where these, you know, financiers, merchants are hanging out. And the merchants who want to insure part of the risk will write their name underneath the slip, you know, at the bottom of the description. And often they'll Share it. So, like, one merchant will be like, yeah, I'll take 10%. You know, it's like £1,000 worth of stuff. I'll insure £100 of it for some price. And so these guys, these merchants writing their name underneath the description, come to be known as under writers. Isn't that nice?

[C]

That is great.

[D]

Or from the Italian subscribers. Love that one. Yeah, yeah, Subscribere or something that they may have been using in Italy already. Right. This is not a new system. And in fact, in fact, insuring ships more generally is truly ancient. As far as I can tell, the first kind of insurance was for shipping. It's been around for thousands of years. By the time Lloyd's gets going, the earliest insurance we know of comes from the code of Hammurabi.

[C]

No.

[D]

1750 BC, Babylonian legal code.

[C]

This is the oldest we've gone, I think, so far.

[D]

The one to beat. The one to beat. And that insurance was something known as bottomry. And the way it worked was someone say, Kalima merchant, could borrow money to fund a sea voyage. So you borrow the money, whatever. You buy your stuff, you hire your crew. If the ship is lost, you don't have to pay back the money, but if it returns successfully, then you pay it back with interest. And that interest is effectively a premium. Yeah, it's what the insurance premium is. And it makes sense. It makes sense that insurance should start with ships because ships have really the two things you want for an insurance market. One, something that's so valuable that you'd be totally screwed if it was lost. And two, it's facing a risk that is fundamentally quantifiable. There are lots of ships going on similar voyages. So you can. Even before there's mathematical probability invented, people have a rough sense of the probability of loss. So if you multiply the value times the probability of loss, that tells you basically how much you should charge for your premium. That's what you need for an insurance market.

[C]

And I'm going to add a third one, which is there is a definable outcome. The ship arrives or it does not, and then your contract can be exercised.

[D]

Yes. You don't need a bunch of lawyers saying there is a ship or there is not a ship, although that will emerge later.

[C]

Yes.

[D]

So Edward Lloyd sets up shop, becomes the hub of the marine insurance business in London.

[C]

Sells a lot of coffee.

[D]

Sells so much coffee. And I want to be clear, because this is one of the most interesting things about Lloyd's. Lloyds itself never becomes an insurance company. It's a marketplace. Right. It's a place where people selling insurance and people buying insurance come together. Like think of a stock exchange, but for insurance. That's what it is and what it always will be. Edward Lloyd died in 1713. Coffeehouse. Passed down through his sort of family, through various owners. And over the years, over the decades, in the 1700s, something really interesting happened to the insurance market at Lloyd's. And that is, it went from being this useful service, insurance, to being a market for rampant speculation.

[C]

Almost like this happens anytime there's a market. But go on.

[D]

Yes, yes. Which is kind of reassuring, right? Everybody's like, oh, the world today. No. In fact, in the 1700s at Lloyd's, people start taking out insurance policies on voyages where they have no financial stake. They're just sitting there being like, oh, that guy's ship, it's finished.

[C]

I saw a drunk captain. I gotta. I'm taking out insurance on that guy.

[D]

They even start taking out life insurance policies on random people, like some guy on trial for treason. They'll basically be betting that he's found guilty.

[C]

And they invented Kalshi and polymarket.

[D]

Yes. Prediction markets, right? Yes. We call this prediction markets today. And interestingly, everybody is like, oh, that's because the world is so bad today. Everything is so financialized now. No, the world has been kind of gross and financialized. Right. For 300 years. Actually more. We recently did a prediction market story, and it actually goes back even farther.

[C]

There are people who argue that what was happening in the coffee shop may have some positive effects. If someone knows the captain is drunk, goes and takes out a policy on him, you're at least sharing information. That is information, and that's what you're in the coffee shop for. So that's the pro prediction markets argument.

[D]

That's fair. There are lots of people today and then who say it's just gross and bad and not doing what insurance is doing. And crucially, at Lloyds, some of the underwriters, some of the people who were doing their business there, hated this prediction market thing and decided to get out and create what would become the Lloyds. We know that is after the break.

[A]

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[D]

So it's the 1760s and some of the underwriters at Lloyd's think the whole prediction markets thing, I didn't call it that then, is a bad look. And not just in a, you know, these degenerate gamblers are making us look bad kind of way because of the nature of insurance, right? In a normal business, you pay your money, you look at the merchandise, it's fine, you walk away and that's the end of it. But insurance is not like that. In insurance, you pay your money and then you go away for a Month, six months, a year. And if your ship sinks, you come back and then you have this giant claim.

[C]

It's a relationship. You have to be able to find the underwriter after something goes wrong.

[D]

You have to trust. You have to trust that they're going to be around and they will give you the money. And so, you know, reputation always has some value in business, but in insurance, reputation is profoundly important. And so in 1769, a bunch of underwriters who are worried about their reputation decide to separate themselves from the. From the gamblers at Lloyd's, break away to a new coffee house. They leave Lloyd's. They set up a new coffee shop that they call new Lloyds.

[C]

Wow, three Ls. So they're first in the phone book.

[D]

LL AAA Lloyd's insurance is like Ray's. Remember Ray's Pizza in New York? It was original Ray's.

[C]

There still is famous.

[D]

Original raise, maybe Famous raise, I don't know. The old Lloyds actually kind of atrophies, disappeared. So New Lloyds just becomes Lloyds and by the way, the sort of prediction market type gambling that actually gets banned by law. And then a couple years after that initial split, 79, I believe it's 79 of these merchants and underwriters who've gone to start New Lloyds. They take an even more important step. They decide, like, we're not just a bunch of people who happen to work in the same room in the same coffee shop. We are something more than that. We're not exactly a company. We don't work for some boss. But we are what, we're an association where, you know, they come to be known later as the Society of Lloyds. And so they create a set of rules that they all agreed to abide by. And they actually have a leader who emerges at this time not a boss, because they don't have a boss, but a guy who's clearly kind of bringing them together, making them something more than a bunch of people who happen to work in the same room. I think this guy is. I was going to say he's the first key figure in the history of Lloyd's, but I guess Lloyd was the first key figure, so he's the second key figure. His name is John Julius Angerstein. His name was my name too. And whenever we go out, people love his shout. John Julius Angerstein was born in St. Petersburg, Russia. Moved to London as a teenager, started hanging out at Lloyd's, doing a little underwriting on the side as people did. And John Julius Angerstein was very good at pricing risk, which is the essential skill for an underwriter.

[C]

Do we know why was he better at math?

[D]

Don't know. Don't know. Just know that he kept getting it right to the point where the policies he wrote became known as Julius.

[C]

Ooh, gold standard.

[D]

Yeah. Like a brand. And everybody else was eager to, like, get in on them. You know, underwriters would share risk. So he. He actually started this thing at Lloyds where there would be a lead underwriter. The first person who underwrote it would set the premium, and then everybody else would just be in or out.

[C]

Yeah. And if John Julius is your lead underwriter, you're like, this is easy money.

[D]

This is easy money. He knows how to price risk.

[C]

Yeah.

[D]

And Lloyds is rising in stature now, and they decide, you know, coffee house isn't. Isn't going to do it. And so they all put up £100 to find a new location, and they move to the Royal Exchange. Not a stock exchange, but kind of a commercial building. Queen Elizabeth had opened it a couple hundred years before this. And this is where Lloyd's becomes, you know, the Lloyds of London that we know, the place where everybody goes to insure a ship or the goods on a ship.

[C]

You had to bring your own coffee.

[D]

You had to. I don't know if you had to bring your own coffee. There might have been a kitchen there. Don't know about that. And now Lloyd's is highbrow. It has become highbrow. Angerstein is friends with Nelson, the naval hero, with Pitt, the prime minister. He collects Renaissance paintings. In fact, after he dies, a bunch of his paintings become like, the nucleus of the National Gallery in London. And he has. John Julius Angerstein has this one moment that his, like, signature moment. And it comes in 1799 when there's a financial crisis in Hamburg, what is not yet Germany and London Bankers want to step in to prevent the crisis from spreading. There's no central banks really yet at this point. And so the bankers get together a bunch of gold and silver that they're going to lend to the bankers in Hamburg to try and stop the crisis there. The gold and silver is loaded onto a ship called HMS Lutine that had been won from the French earlier. Fun.

[C]

It's a ship loaded with gold and silver setting out on the high seas.

[D]

Setting out on the high seas. We know what's gonna happen, and we know what's gonna happen first. What's gonna happen first is there's one place you go before your ship full of gold and silver leaves Port, Yes, Lloyd's to buy insurance for all that gold and silver. John Julius Angerstein is the lead underwriter. The ship sets sail, riding low in the water.

[C]

It's filled with gold and silver.

[D]

And it does hit a storm off the coast of the Netherlands, crashes into a sandbank. It, Captain Lancelot Skinner goes down with the ship. Of more than 200 people on board, only one survives.

[C]

Wow.

[D]

And a few weeks later, John Julius Angerstein and the other underwriters pay the claim in full.

[C]

That is brand management.

[D]

That is brand management. Now you have a ship full of gold and silver. And it's not like out in the middle of the ocean. It's, you know, off the coast of the Netherlands. You can see it. And so, of course, people are always going out there being like, I want some of that gold. And occasionally they manage to, you know, get a little bit, but there's no great recovery. But they get the ship's bell. The ship's bell. You know, it's kind of cool. It's not a fortune, but it's cool. And they send the bell back to Lloyds, and Lloyds puts the bell in the middle of the room, the underwriting room.

[C]

And is this a reminder to, like, always get the price of insurance? Right?

[D]

It is a reminder and a reminder that Lloyds pays its claims, but they do also give it a functional role. And that was this. When news came in about an overdue ship that had been insured by Lloyds, they would ring the bell. One ring meant the ship had sunk. Two rings meant it had arrived safely. So you can imagine the drama, right? Like they ring it once and everybody pauses.

[C]

Bong, hurrah, huzzah.

[D]

And they really feel the huzzah because it means they don't have to pay the claim. Not that they're not good people, but I think it's also important because it is really showing us how Lloyd's is self mythologizing, as you said, managing their brand. We would say today it's Lloyd's consciously creating the legend of Lloyd's. And in fact, Lloyd's is unique. I mean, there are, you know, the kinds of insurance companies that are familiar to us today by this point, but Lloyd's, this market where these underwriters are working side by side, not working for an insurance company, is unique. And it's kind of amazing that not only does it work, but it comes to dominate marine insurance in this company. That's going to be the most important marine power on the planet. So there is this one other part of the Lloyd story that was not mythologized, that was not told, that was basically ignored for a long time. But it's been getting a lot more attention recently. And that is the slave trade. This era we're talking about, you know, late 1700s into the early 1800s was the peak of the transatlantic slave trade. And underwriters at Lloyd's did sell insurance, both on the ships and on the lives of the enslaved people themselves. And a few years ago, Lloyds commissioned an academic study of this history. They're like, you know, we don't want to ignore it anymore. We want to talk about it. They formally apologized for their role in the slave trade. And there were some people who said, that's fine, it's good that you're doing this, but really what you should do is give back the money you made from insuring slave ships.

[C]

And they did make money off this.

[D]

They did make money off it. But of course, Lloyd's has not given back any of that money. We'll be back in just a minute.

[C]

Bong.

[B]

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[D]

Since the day we met.

[B]

As the League1 volleyball season heads towards its final stretch, there's no better time to we really are like yin and yang, vodka and tequila. You'll hear unfiltered analysis, behind the scenes stories and conversations with leaders making an impact across the sport. Today we have Logan Lednecki. I feel like our fan base in general is very connected. Just like a comforting feeling getting to play at home. Whether you're following the final push of love season or just love the game, serving Pancakes brings you closer to the action and the people shaping the future of volleyball. Jordan Thompson had that microphone. Oh, God forbid we make a mistake or cuss at our coach like one time or two times. Open your free iHeartradio app. Search serving Pancakes and listen. Now, this has been Serving Pancakes and we'll catch you on the flip side. Okay. Presented by Capital One, founding partner of iHeart Women's Sports.

[C]

Last winter, Jacob I went cross country skiing at the Von Trapp family Lodge. And I was looking at the name, I thought, oh, it's named sort of after the family in the Sound of Music, but it actually was the family from the Sound of Music who came to America and started this ski resort mecca in Vermont. And it made me think, like, what are these stories behind the big films that you never really hear? You see the film, but after the credits, what happened?

[D]

Yeah, it says, like, based on a true story, right? It doesn't say it's a true story. And so the question I always have is, like, what part of that story is actually true?

[C]

If you ever want to know about the true story behind a film and you want to see how accurate it is, there's a podcast for you. It's called the Cinephiles.

[D]

They've made more than 400 episodes and counting. So there's a good chance that if there's a movie that you're interested in, the Cinephiles has covered it.

[C]

You can find it by searching for the Cinephiles. That's C I N E F I L E S. Wherever you get your podcasts,

[D]

We're back.

[C]

Bong. Bong.

[D]

It's the late 1800s, and the next big thing is about to happen at Lloyd's, and that is going beyond shipping, going into what they call the non marine business. And there is a guy, there is one underwriter who really takes the lead here. And his name, most British name ever, Cuthbert Eden Heath. Cuthbert Eden Heath, son of an admiral, of course, starts working at Lloyd's at age 18, becomes an underwriter at 21. And his first big moment comes in 1889 when he's 30 years old and there is an epidemic of burglaries in London. Burglaries.

[C]

So back then, burglars actually did wear the black masks and the striped shirts.

[D]

They have a big sack. Oh, of course, it wouldn't be a dollar sign. It would be the L, right? It would be the pound sign.

[C]

They had a pig sack filled with candlesticks.

[D]

And then people would wake up and they'd be wearing the little cap and they'd be like, martha, we've been robbed.

[C]

Burgled.

[D]

Burgled. So at the time, you could buy fire insurance on your house that had actually been around for a few hundred years, but there was no insurance policy that would cover burglary. And one day in 1889. A broker says to Cuthbert Heath, everybody's afraid of burglary right now. Could you write an insurance policy that covers that? And Heath's answer is famous. He says, why not? Why not? This becomes his motto. Why not?

[C]

How did he know how to price that? They had 200 years of marine information. You said how important information is. But how do you figure out when something new is happening like this burglary?

[D]

So Cuthbert Heath had a more nerdy motto than why not? Which I really like. And that is any risk is insurable at the right price. At the right price. What this is telling us is he understood this issue that you're raising. He understood that insurance is fundamentally about data. And he was really a data guy in a lot of ways. He starts selling all kinds of insurance policy. And his big breakthrough is combining that why not attitude, you know, swashbuckling. Sure, I'll sell this. I'll sell that. With this very nerdy dedication to data. So, like, for example, people wanted catastrophe insurance, basically, in the Caribbean, where hurricanes periodically sweep through and wipe everything out, why not? Heath says, and he studies a hundred years of historical hurricane maps to get the data. There's a smallpox outbreak in London, and people want smallpox insurance. And he says, okay, I'll sell you smallpox insurance, and if you get vaccinated, you get 75% off. Because he understood how profoundly vaccination reduces risk.

[C]

Is this also the rise of a fear about things that are rare in the world? Because we have a lot more newspapers and communication, you're learning about a lot more bad things that can happen in the world, like a spate of burglaries.

[D]

That's an interesting question. I mean, maybe that. Or maybe it's more of a belief in probability. Right. I feel like if you go, you know, back a fair bit of time, people didn't think of the world as probabilistic. They thought of it as God's will that something will happen or won't happen. And so the notion that you could insure against risks would have been odd. Maybe it's also, there's more people with money. The world is becoming more financialized. Right. By this point, the industrial revolution in England has happened. Wages have risen. So people have money for things like insurance. These could all be reasons it's happening.

[C]

You have a house full of candlesticks. You want to get the fire insurance and the burglary insurance.

[D]

That's right. That's right. If you have a mud hut, it's not so high on your list. Let me give You a couple more Cuthbert Heath, great moments in insurance, greatest hits, World War I. Everybody's terrified that German zeppelins are going to float over the Channel and bomb London. And so he does some math. He's like, well, I could sell you insurance against that. And he's like, well, let's see. Here's about how many airship attacks Germany could mount. Here's how many bombs a zeppelin can carry. Here's how much damage each bomb can do. But obviously this is not a data rich project. There's not hundreds of years of data. So he's like, okay, that's an estimate. I'm going to multiply that by six, give myself some wiggle room. And that's the premium.

[C]

Absolutely, yeah.

[D]

The most famous kind of insurance that Heath sold was earthquake insurance. And to figure out how to price earthquake insurance, he, he did a few things. He, he paid people in India to draw maps of historic earthquakes. He gathered data from South America, from North America. He created this handwritten earthquake book that I think Lloyd still has in the vault.

[C]

So he knows the sort of average damage that it does, how often it might happen.

[D]

Aware. Right. Earthquakes, as we know, randomly distributed around the globe. And there is a big moment for Cuthbert Heath. You can guess it, right. He's working in late 1800s, early 1900s, selling earthquake insurance. It's a moment we've already talked about on the show.

[C]

We have 1906, the San Francisco earthquake. We've referred to it because it disrupted the railroads, disrupted financial markets, hugely led

[D]

to the panic of 1907. Yeah. So, you know, the earthquake itself lasted for one minute or so, did a lot of damage, but things got much worse over the next couple of days after that. Because of the fires. Right. Fires started, the pipes were broken and fires just consumed the city. In the end. Something like 80% of San Francisco was destroyed, 28,000 buildings were destroyed. So it's a total catastrophe. It's a profound human tragedy. And from the point of view of an insurance company, it's a rather complicated situation because some buildings had earthquake insurance, but not fire insurance. Some had fire insurance, but not earthquake. And if there's an earthquake and then your house gets burned down by a fire, is it covered if you don't have fire insurance?

[C]

Yeah. I remember after Hurricane Katrina, you might have had hurricane insurance, but not flood insurance. Yeah.

[D]

And this is kind of why people hate insurance companies, right? Yeah. You pay your premium year after year,

[C]

you think you're insured on certain things,

[D]

the bad thing happens, and then you go to the insurer and they say, oh, look, actually on page 11, it says, blah, blah, blah, Sorry, we're not going to give you any money. So this is happening in San Francisco after the earthquake. People are arguing with their insurers. Many of them are not paying claims or paying some of the claims. And as this is happening, Cuthbert Heath sends a telegram to his agent in San Francisco. I wrote it. Here, read it.

[C]

The telegram said, pay all our policyholders in full, irrespective of the terms of their policies.

[D]

Irrespective of the terms. He's saying, don't read the fine print, just pay. Just give people money to rebuild their houses, to rebuild the city of San Francisco.

[C]

You do not see this kind of telegram very often today.

[D]

No, it says, do not pay our

[C]

policyholders irrespective of the terms of their policies.

[D]

And, you know, it's great that he did this, and it was great for Lloyds.

[C]

Sure, sure. We talked about reputation as everything. And at this moment, this probably sealed the fame of Lloyd's, not just among ship owners and building owners, but worldwide.

[D]

Yes, People suddenly knew all around the world that Lloyd's paid its claims. Next time on business history, part two of the story of Lloyd's one free chapter in the 20th century, Lloyds goes bananas. They insure Rockstar's voices. They insure nuclear power plants. They insure satellites. They insure everything that moves. They ensure lots of things that don't move. And eventually, all that ensuring bankrupts some of the richest people in England, also some people who weren't that rich. It almost takes down Lloyds and almost blows up the global economy.

[C]

Bong, bong. Bong, bong, bong.

[D]

Today's show was produced by Gabriel Hunter Chang and engineered by Sarah Bruguer. Our video editor is Matt Nielsen.

[C]

Yes, we have videos on YouTube.

[D]

Our showrunner and editor is Ryan Dilley. I'm Jacob Goldstein.

[C]

And I'm Robert Smith. And you can email us at businesshistoryushkinfm.

[D]

Thanks to everybody who's been emailing. We love them. We talk about the emails. We're excited about them, so please keep it up. Thanks for listening.