Huge Insurance Company, Though Changing, Is Still Profitable : Lloyd’s Losing Many Blue-Blooded Members

Lloyd’s of London, once considered a respectable and sound form of gambling for Britain’s blue-blooded and wealthy, is scaring members away with ever-bigger risks of huge insurance claims.

The world’s largest insurance market celebrates its 300th birthday this year, boasting multibillion-dollar profit and a reputation for never failing to settle a valid claim.

Its 300 syndicates run by underwriting agencies insure anything from tankers, space satellites and oil cargoes to pianists’ hands.

But the exclusive underwriting society is now seeing one of its biggest defections ever of “names,” who provide capital for Lloyd’s to operate and accept insurance business for their own profit or loss.

“We’re not surprised the number of resignations has risen. There have been difficulties, and there is a feeling (that the) risk-reward ratio is not as favorable as it used to be,” said Raymond Nottage, deputy chairman of the Assn. of Lloyd’s Members.

The 33,000 names, which include celebrities and royalty such as Queen Elizabeth’s cousin Princess Alexandra, must show ready assets of $168,000 and upwards to join.

Some now fear all that could evaporate with an unwise investment. Recent weeks have seen hundreds of resignations, and Lloyd’s predicts the year could end with a record exodus of 1,700--more than triple last year. Most of the resignations were by external members with no direct professional involvement in the market.

Shrinking Tax Advantages

The 18th-Century Lutine Bell in the company’s London headquarters--the ceremonial relic rescued from a wrecked frigate that rings twice for good news, once for bad--should give a long single toll for the future, some experts say.

Defectors cite shrinking tax advantages and market share and big possible losses from U.S. pollution and asbestos claims looming in the years ahead.

Further fears about risks erupted when it emerged that blasts July 6 that destroyed the Piper Alpha North Sea oil platform and killed 167 could produce record claims topping $1 billion. Lloyd’s underwriters will foot much of the bill.

Industry sources expect that increased risks will mean the members’ fee may be raised to $420,000.

Unperturbed, Lloyd’s says there was overcapacity anyway, and it does not plan to replace many of the resignations. It also points to its huge profit.

In 1984, the last completed trading year, it handled premium income of $4.97 billion and had a profit of $468 million.

Analysts expect 1985 to top that.

They say people will always want to belong to a prestigious circle graced by history and tradition, and it can be a good investment if risk is spread over various sectors.

‘Names’ Philosophical

Lloyd’s banks hard on its links with the past, maintaining doormen called “waiters” in red-coated livery and top hats. It built its futuristic new headquarters in the hub of London’s business area, close to where shipowners exchanged gossip and money at Edward Lloyd’s original coffee house 300 years ago.

Several names were philosophical about possible losses and saw their membership as lifelong, able to span some good years and some bad.

Echoed Oliver Carruthers, publisher of the Digest of Lloyd’s News: “Lloyd’s has a formula that has worked for a certain degree of consistency and produced rewards.”

Even during corruption scandals over the past decade, when wealthy names were defrauded of several hundred million pounds, new members were lining up to join.

Analyst Philip Olsen of stockbrokers Kitcat & Aitken noted that resignations comprise only a small percentage of total members and said there are many people who would like to take their places.

Moreover, the sheer size of Lloyd’s business will guarantee it a dominant position, although more U.S. business is being underwritten domestically, said Andrew Goodwin, an insurance broker analyst from stockbrokers Phillips & Drew.

But it remains to be seen whether Lloyd’s will benefit from new business trends arising from the dismantling of European Community trade barriers by 1992 or succumb to more competition.