The final incompatibility of view, and the final choice to be made, is this: Is Lloyd’s, under a new management team, with a sparkling business plan and with Mr. Middleton’s patrol cars seeing that the motorway speed limit is observed, getting itself lean and keen, keeping its overheads bloody low, and about to embark on a historic phase of regeneration in the midnineties, or is this all blarney and bluff, since the capital base has been disastrously eroded, Names are leaving not like sheep but like lemmings, corporate capital has much better things to do than rescue Lloyd’s, and the whole boiling is going into meltdown very soon?
Truths normally lie in the middle, but one thing is certain. Lloyd’s might survive the rage of its Names and the spate of legal actions; it might turn into a decent, well-regulated market; it might endure the losses still to come. What won’t survive, what Lloyd’s has lost forever, is a certain sort of Englishness on which it once prided itself, and which was coincidentally good for business. In the first place, it will have lost its money base in Arabella’s-pony land, that world of second homes, private incomes, and private education: Peter Middleton anticipates that, if the business plan succeeds, within seven or eight years no more than 15 percent of the membership will be opting for unlimited liability—a 15 percent that will be “decreasingly English,” with a fresh intake of buccaneering souls from the Pacific Basin. Beyond this, Lloyd’s will have lost—has already lost—its peculiar, arcane, mystical, sexy status among that segment of British society it once did so well by; for want of a better word, it has lost its honor. It was the assumption of honor—beyond, or at least beside, such motives as snobbery, greed, and supposed canniness—that brought in the rush of new Names in the eighties; and in the dishonoring of Lloyd’s they have lost their shirts. Of course, loss of honor may be no bad thing: see Falstaff. The irony is that those rendered insolvent by Lloyd’s seem to feel this dishonoring more than those who caused it. The suicides are heavily on one side.
It’s hardly a surprise that very few people are currently joining Lloyd’s. The participating membership has fallen from 32,433 in 1988 to 19,681. From 1989 to 1992, 10,661 Names resigned and a mere 735 new members were elected. For all the received wisdom about going in at the bottom of a market, for all the statistics to prove that the best syndicates continued to make money through the worst years, these 735 must have nerve. Peter Middleton, among others, quoted to me the Lloyd’s maxim “If you don’t want any risk, go to the Post Office,” but in late 1993 the Post Office looks a most attractive place. More than once, I heard the ultimate Doomsday scenario from the burnt Names. It goes like this. Leave aside the question of corporate capital, since, if it comes in, it will be largely protected from assuming earlier losses in the market. Names are going bust all over the place, the capital base has dwindled, many of this year’s bills are unpaid, more losses are predicted for next year (and, if previous forecasts are a model, the reality will turn out to be grimmer): where is the money going to come from? If a member is bust four or five times over, even a visit to the Hardship Committee doesn’t make the bills go away, so whom do they devolve onto? Onto the members who are still solvent. “We’re all connected via the Central Fund,” Clive Francis points out. So far, in order to pay these wider debts, there have been three annual 1.5 percent levies on the amount every single member underwrites. (“You do rather grudge it,” an Irish Name told me. His already painful cash call for the year 1990 had been augmented by six thousand pounds to help out the losers.) But, as more Names go under, the pressure on the remainder mounts. Here is the bottom line of the Doomsday scenario as expressed by one professional Lloyd’s watcher: “I take the view that every Name at Lloyd’s is bust—it’s just that they don’t know it.”
One of those who don’t know it—or, to put it another way, who are trading through the current difficulties—is one of the more unexpected Names among the Lloyd’s Great and Good. Melvyn Bragg, novelist and TV arts presenter, is from the Cumbrian working class, the son of a publican who later kept a sweetshop. One of Bragg’s first memories is of sitting in the fourth row of the Temperance Hall in Wigton and listening to his mother read the treasurer’s report of the local Labour Party meeting. Throughout his high-profile TV career, he has been a loyal and equally high-profile member of the Labour Party. Indeed, at the time he went into Lloyd’s—“about 1980”—he was also seriously tempted by a career in Parliament. Had this taken off, he would today have found himself the only Name on the Labour benches, opposite the forty-seven Tory Names. He admits that he “didn’t think through” the potential conflict between membership of what is seen as one of the true bastions of the Tory upper-middle class and membership of what was then a comparatively left-wing Labour Party.
So why did he join? At the time, he had a house in Hampstead worth £150,000, a cottage in Cumbria, £20,000 in the bank, and “the income was beginning to build.” He didn’t fancy the stock market, and a financial adviser suggested Lloyd’s. “It seemed a fair punt. That sort of thing suits my temperament and financial needs. I quite liked the gambling element.” What was his response to the concept of unlimited liability? “I quite liked the punt. My father, on a small income, gambled all the time, though he never left my mother short.” The odd thing is that, apart from Lloyd’s, Bragg doesn’t gamble at all. “I don’t even have a bet on the Grand National. I always thought it was a mug’s game, but, well, there you go.” The few artsy Names there are in Lloyd’s tend to be—like Baron Archer of Weston-super-Mare—as openly right-wing as Bragg is left. When I put the rarity of artsiness, leftiness, and Namedom to Bragg, he pauses and wonders, “Is John Mortimer a Name?” This is the same response I get whenever I put the question elsewhere: “Is John Mortimer a Name?” I ring the benign Rumpole creator to check. “Certainly not,” he replies, sounding slightly indignant at the suggestion. Why not? “I think it’s a totally idiotic way of losing your money. I don’t see how anyone goes in unless they’re insane.”
Bragg, though at times puzzled, seems untroubled by his membership. “I honestly think it’s an honorable way to make your money work for you.” But he could have put his money—while avoiding the stock market—into, say, a regular insurance company: was there an element of snobbery in his decision? “One hesitates not to claim vices,” he replies, and we leave it at that. Bragg has also given his professional advice to Lloyd’s. A year or so ago, he was informally consulted about the unhelpful publicity the market was getting. He was shocked to discover that “they had a press office as big as Border Television’s”—i.e., roughly one man, a boy, and a grouse. This side of things is now handled in a more assured and glossy way, as part of the “transparent society” Lloyd’s now claims itself to be.
The novelist admits that at the time he was “appallingly lackadaisical” about the consequences of joining Lloyd’s. But he was also fortunate in the advice he received. The easily made comparison between Namedom and gambling on the horses has some validity, though not in one basic respect: if you walk off the street into a book-maker’s, you are likely to get more or less the same odds from any firm; if you walk off the street into Lloyd’s, the first and probably the biggest gamble you take lies in which agent you are introduced to. Bragg followed “very, very lightly” the syndicates he was put on; he never took out stop-loss insurance (“When I worked out the figures, it wasn’t worth it”); and, though he’s lost money in the last couple of years, “I think I’m quite a bit ahead in a crude sense.” He is currently on twenty-eight syndicates, he says, four losing and twenty-four doing “very well.” Do the losses of the last years make him think about getting out? “The equation is insane,” he replies. By which he means that resignation does not exempt you from future losses on the syndicates left open; so in effect you would only be resigning from your winning syndicates. Leaving doesn’t cross his mind. “I think Lloyd’s is a better bet now. If I could get off the open syndicates, I’d pour it in now. There’s masses of syndicates making money. It’s a good time to join.”
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Both the English novelist and an Irish businessman I’d talked to took the same line. If they’d known at the time of joining what was to happen, they would never have gone in (“The sort of punter I was in 1980 wouldn’t touch it with a barge pole now,” says Bragg); on the other hand, given that they are in, and have survived the losses of the last three years, they think it’s a fine time to stay in. The comparison with gambling seems truest when you get down to gut psychological response. If you’ve lost and been burnt, you know it’s a mug’s game—that the horses are nobbled, the jockeys bribed, and the stewards corrupt. If you’ve won, or broken even, you feel yourself a squire of the turf next to the poor saps who’ve lost their cuff links—you’re the one who gets hot tips from the stables, who can sniff a dodgy fetlock at a hundred paces, who knows a chap who knows a chap.
The chap whom Melvyn Bragg knows is the Lloyd’s joint deputy chairman Robert Hiscox, who is also his agent. As the son of a former chairman, Hiscox is very much a Lloyd’s insider, he has been a working Name since 1967, spent twenty years “on the box,” insuring art at the high end of the market, and is currently the chairman of the underwriting agents Roberts & Hiscox. A dapper fifty-year-old, whose words are quiet in tone yet combative in content, he has been arguing in favor of limited liability for twenty-five years. This was always resisted, partly because of a general misreading of the Lloyd’s Acts of 1871 and later, which seemed to forbid it (in fact, they did so only for individuals), but mainly on the ground of “If it ain’t broke, don’t fix it.” “To which I used to reply, ‘Most things cannot be fixed once they’re broken.’” Now he is in charge of raising corporate capital and saving Lloyd’s neck: the biggest fixing job there is.
Hiscox is a plainspoken man and a market realist. He was also the author, a dozen years ago, of that notorious phrase “If God had not meant them to be sheared, He would not have made them sheep.” Faced with that quotation in a TV interview in June of this year, by which time quite a number of sheep had been not just sheared but also butchered and scoffed with mint sauce and all the trimmings, Hiscox correctly pointed out that the true author of the line was Eli Wallach in his favorite film The Magnificent Seven. But still, what did he mean by it? “There are people,” he replied, “who unerringly choose the wrong accountant in life, they choose the wrong wife or husband, they choose the wrong solicitor, they choose the wrong stockbroker, and they have unerring bad judgment, and, unfortunately, if one’s trying to regulate a market so that these people cannot lose money the trouble comes when they meet the wrong Lloyd’s underwriting agent, and it has been a very bad experience for them.” This sounds pretty much like blaming the victims (in any case, shouldn’t one be quoting Yul Brynner rather than Eli Wallach?); and when our conversation turns to “all this grief and misery” of the last few years Hiscox observes that the events of the eighties were always liable to happen “if you have very undemanding capital.” This seems a strange and most chilling way to describe the people I’d been talking to over the last weeks. Besides, wasn’t that what he, as an agent, wanted? He disagreed: “We turned them”—such applicants—“away in droves. So they ran out of this door and into Gooda Walker, unfortunately, and they didn’t go into it with great depth. They trusted a three-hundred-and-five-year-old institution, part of Britain and the Empire, and they didn’t really look into it.”
The new business that Lloyd’s is seeking to attract is unlikely to have many ovine characteristics, and will certainly “look into” things. When I asked Peter Middleton why corporate capital should be attracted to a market that had so dramatically favored the insider in recent years, he pointed out that such institutions are perfectly capable of identifying the syndicates they want to be put on (and will presumably use their muscle to get there). The market will begin accepting corporate Names in January 1994. They will need a capital of £1,500,000 and will have to deposit 50 percent of the amount they underwrite with Lloyd’s (as opposed to 30 percent for individual Names); their liability will be limited; and previous Lloyd’s losses will be “ring-fenced.” This last aspect has attracted criticism from current Names who see themselves as bearing the burden of earlier Lloyd’s failings while corporate capital waltzes in and enjoys all the juicy new business. Hiscox forcefully argues the market necessity of this two-tier system: “You won’t get a new investor coming in and paying a penny for the past.” Besides, he says, in this respect Lloyd’s is no different from the stock market: if a share price falls to a low level, an investor buying it at, say, 24 pence would not—and would not expect to—help out those who had earlier bought the stock at 124 pence.
Hiscox admits that the revolt of the shires has given the action groups a certain whammy over Lloyd’s for the moment. Time is not on his side when it comes to attracting corporate capital, and the sight of a mass revolt by previous investors, not to mention the referral of one case to the Serious Fraud Office for possible criminal prosecution, constitutes bad PR. What if Lloyd’s Names refuse to pay? What if no corporate money comes forward? “With no corporate capital, we can survive into 1994.” He finds it ironic that, having seen off various enemies in the past, and having even got the Labour Party on its side in some recent bits of House of Commons business, the market is now “fighting our own Names.” But then, he wryly observes, “England can only perish but by Englishmen.” This strikes me as peculiarly rich and cheeky, since Lloyd’s has for many a long century lived off being English to the core. I remember the Deficit Millionairess saying, “I thought it was a very English thing to do.” I also remember the West Country Widow’s sharp observation when I mentioned the advent of corporate capital: “I wouldn’t invest in a company that invested in Lloyd’s.”
If the new business plan works and Lloyd’s survives, the market will substantially change its nature. The days of dinner-party trawling, the Wimbledon connection, the amateur investor—the days of sheep and “undemanding capital”—will go. The individual Name will be a rarity; most Names will band together to achieve some corporate status and operate with limited liability, or else they will invest through a larger institution. Of course, the money would come from some of the same people as before, though this time it would be filtered through pension-fund managers rather than arriving like a bag of silver fish forks in the back of a Range Rover. When I ask what Lloyd’s—assuming it survives—will be like in ten years’ time, Hiscox looks misty, if it is possible to look dynamically misty. “My dream is of it as it was at its peak, a pocket of excellence, creating and innovating.” When was that peak? Surprisingly, “about 1790.” Hiscox then talks of “three fundamental things Lloyd’s hasn’t had for twenty years.” These are “One, a rich, sophisticated capital. Two, total integrity. Three, strong government.” At which point, Hiscox makes another cinematic reference: not Eli Wallach this time but Tyrone Power. In 1936, in one of his lesser-known roles, Power played the part of an underwriter in Darryl F. Zanuck’s Lloyd’s of London. The time is around 1790, the “three fundamental things” hold sway at Lloyd’s, and the underwriting hero, according to Hiscox, is a man of “total integrity, doing his thing for his country.” Hiscox kindly lent me a tape of the film.
Lloyd’s of London is a thoroughly jolly piece of tosh, and if you believe that Freddie Bartholomew can grow up into Tyrone Power you will happily believe the rest of it as well. Young Freddie is a childhood friend of a rather posher boy called Horatio Nelson, until destiny separates their paths. Nelson goes into the Navy, and Freddie runs away to London, where he is adopted by the famous Coffee House. He is reminded at the knee of John Julius Angerstein, a famous underwriting baron of the time, that “Lloyd’s is founded on two great pillars: news and honest dealing. If either fails, we fail, and with us the whole of the British merchant marine.” Freddie grows suddenly into Tyrone and falls in love with Madeleine Carroll. The Napoleonic Wars break out. Business is written. The Lutine Bell is rung (anachronistically). Power proudly quotes Angerstein’s dictum that “Lloyd’s is not a collecti
on of moneygrubbing brokers but an organization linked with the destiny of England.” For most of the film poor Nelson is an offstage figure; it is the underwriter who is the visible man of action. Thus he audaciously continues to insure the British merchant fleet at prewar rates, even though it lacks the protection of the British Navy. The Lutine Bell is rung like a dinner gong. Napoleon is finally defeated, and a swooning admirer congratulates the heroic underwriter with the line “Nelson’s won, England’s saved, and Lloyd’s is saved.”
Interesting, and proleptic, and perhaps judiciously forgotten in Mr. Hiscox’s description of the underwriter as a man of “total integrity,” is the route by which the protagonist saves England, Nelson, Lloyd’s, his underwriting capacity, and his love for Madeleine Carroll (and her money too, for that matter, since she has, sheeplike, delivered her inheritance into his arms). He does it by perpetrating a gross deception on Lloyd’s, on his investors and his friends, on the British Admiralty and the British nation, and by repeating and defending that lie for several days, until his old pal Horatio wins the Battle of Trafalgar. For this deceit (and other complicated reasons), he is shot in the back by George Sanders at exactly the same moment as Nelson is being shot by the French at Trafalgar. The admiral, as we all know, dies, but the underwriter survives. Perhaps there is some lesson here, for England and for the burnt Names of Lloyd’s.