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Key to case study 8Key to case study 8 Johnson is the owner of a house. The cost of Johnson is the owner of a house. The cost of

rebuilding the house will be rebuilding the house will be ￥ ￥ 600,000. He has a 600,000. He has a mortgage for mortgage for ￥ ￥ 350,000 with China Construction 350,000 with China Construction Bank. Discuss what extent both Johnson and China Bank. Discuss what extent both Johnson and China Construction Bank have an insurable interest in the Construction Bank have an insurable interest in the house? house?

Johnson is the owner of the house and therefore has Johnson is the owner of the house and therefore has 100 percent insurable interest of the house, that is, 100 percent insurable interest of the house, that is, ￥ ￥ 600,000. 600,000.

China Construction Bank has also an insurable China Construction Bank has also an insurable interest as mortgagee in the house. But the interest is interest as mortgagee in the house. But the interest is limited to $350,000. limited to $350,000.

In practice, China Construction Bank will require In practice, China Construction Bank will require Johnson to insure the house in the joint names of the Johnson to insure the house in the joint names of the owner of the house and China Construction Bank. owner of the house and China Construction Bank.

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Chapter 10 Chapter 10

Insurance MarketInsurance Market

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ContentContent1. London Insurance Market1. London Insurance Market2. London Insurance companies2. London Insurance companies3. London Insurance Organizations3. London Insurance Organizations4. Insurance intermediaries4. Insurance intermediaries5. Recent Changes in London Market5. Recent Changes in London Market

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London Insurance MarketLondon Insurance Market

A market is a group of people who are A market is a group of people who are individuals and members of organizations. individuals and members of organizations. They are the actual or potential buyers of They are the actual or potential buyers of a product. a product.

Some specialists believe that the core of its Some specialists believe that the core of its activity in London is the conduct of activity in London is the conduct of “internationally traded insurance and “internationally traded insurance and reinsurance business”. reinsurance business”.

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2. London Insurance companies2. London Insurance companies

The amount of insurance companiesThe amount of insurance companies

500 500 companies withcompanies with

head officeshead offices

127127 foreignforeign

companiescompanies

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3. London Insurance Organizations3. London Insurance Organizations

Organizations

Association of British Insurers

London Insurance and ReinsuranceLondon Insurance and Reinsurance

Market AssociationMarket Association

Institute of London Underwriters

Fringe companiesFringe companies

PoolsPools

Contact officesContact offices

Protection and Indemnity ClubsProtection and Indemnity Clubs

Lloyd's of London (see the pictures)Lloyd's of London (see the pictures)

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3. London Insurance Organizations3. London Insurance Organizations

Organizations

Association of British InsurersAssociation of British Insurers

London Insurance and ReinsuranceLondon Insurance and Reinsurance

Market AssociationMarket Association

Institute of London UnderwritersInstitute of London Underwriters

Fringe companiesFringe companies

PoolsPools

Contact officesContact offices

Protection and Indemnity ClubsProtection and Indemnity Clubs

Lloyd's of London (see the pictures) (see the pictures)

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A. Association of British InsurersA. Association of British Insurers

Association of British Insurers (ABI) is the Association of British Insurers (ABI) is the main trade association of insurance main trade association of insurance companies in the UK , with membership of companies in the UK , with membership of 450 firms transacting all classes of life and 450 firms transacting all classes of life and non-life insurance. non-life insurance.

They account for over They account for over 90%90% of the of the worldwide business of the company market. worldwide business of the company market. ABI has eight regional representatives in ABI has eight regional representatives in various parts of the UK . various parts of the UK .

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B. Institute of London Underwriters (ILU)B. Institute of London Underwriters (ILU)

Institute of London Underwriters (ILU) is the trade Institute of London Underwriters (ILU) is the trade association for companies to write marine, aviation association for companies to write marine, aviation and transport business in the London company and transport business in the London company market. market.

All companies authorized by the DTI (Department of All companies authorized by the DTI (Department of Trade and Industry) to write such classes are eligible Trade and Industry) to write such classes are eligible to apply for membership provided they have been to apply for membership provided they have been transacting such business in the UK or in a transacting such business in the UK or in a comparable market elsewhere in the world.comparable market elsewhere in the world.

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C. London Insurance and C. London Insurance and Reinsurance Market AssociationReinsurance Market Association

London Insurance and Reinsurance Market London Insurance and Reinsurance Market Association (LIRMA) is also the trade association Association (LIRMA) is also the trade association for companies to write primarily non-marine for companies to write primarily non-marine insurance and reinsurance business in the London insurance and reinsurance business in the London Market. Market.

Only companies that are authorized to write Only companies that are authorized to write insurance in the UK may join as Ordinary insurance in the UK may join as Ordinary members; there are about 104 members. There is members; there are about 104 members. There is considerable overlap between the membership of considerable overlap between the membership of LIRMA and ILU, therefore there are 39 LIRMA and ILU, therefore there are 39 companies belonging to both bodies. companies belonging to both bodies.

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D. Fringe companies D. Fringe companies The term “fringe companies” in the past referred to The term “fringe companies” in the past referred to

companies that operated on the fringes of the Lloyd's companies that operated on the fringes of the Lloyd's market. They may write direct insurance and market. They may write direct insurance and reinsurance business on the London market. reinsurance business on the London market.

They are relatively small companies which will take a They are relatively small companies which will take a small line on risks led by a Lloyd's syndicate. At the small line on risks led by a Lloyd's syndicate. At the time of writing, there are very few companies in that time of writing, there are very few companies in that category, but their number does tend to vary with the category, but their number does tend to vary with the state of the underwriting cycle. state of the underwriting cycle.

They enter the market at times when capacity is scare They enter the market at times when capacity is scare and leave the market when premium rate are falling and leave the market when premium rate are falling and losses are rising. and losses are rising.

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E. Contact officesE. Contact offices Some foreign companies maintain an offer in London to Some foreign companies maintain an offer in London to

keep in contact with the market, and to transmit to their keep in contact with the market, and to transmit to their head offices for acceptance any business which may be head offices for acceptance any business which may be offered to them by brokers. It is an offence for such a offered to them by brokers. It is an offence for such a company to actually underwrite the business in Britain. company to actually underwrite the business in Britain. F. Protection and Indemnity ClubsF. Protection and Indemnity Clubs

Marine Protection and Indemnity Clubs (P&I Clubs) Marine Protection and Indemnity Clubs (P&I Clubs) form the most important group of mutual associations form the most important group of mutual associations operating on the London Market. operating on the London Market.

At the end of 1992, of the 41 Clubs writing business in At the end of 1992, of the 41 Clubs writing business in Britain, 4 were incorporated in Bermuda and 2 in Britain, 4 were incorporated in Bermuda and 2 in Luxembourg. Many of the Clubs employ managers who Luxembourg. Many of the Clubs employ managers who act for two or more Clubs. act for two or more Clubs.

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G. Pools G. Pools

There are two pools operating in the London Market. One is There are two pools operating in the London Market. One is International Oil Insurers and the British insurance (Atomic International Oil Insurers and the British insurance (Atomic Energy) Committee. Both operate on a net line basis.Energy) Committee. Both operate on a net line basis.

H. Lloyd's of London H. Lloyd's of London

Lloyd's of London is a market place. The capital is supplied Lloyd's of London is a market place. The capital is supplied by investors, known as Names, who conduct their business by investors, known as Names, who conduct their business through syndicates. Managing agents run these syndicates through syndicates. Managing agents run these syndicates on the Names' behalf. on the Names' behalf. (see the chart)(see the chart)

In 1994, 25 corporate investors including 12 listed In 1994, 25 corporate investors including 12 listed investment companies formed solely to underwrite business investment companies formed solely to underwrite business at Lloyd's. They were admitted to membership of Lloyd's. at Lloyd's. They were admitted to membership of Lloyd's.

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4. Insurance intermediaries4. Insurance intermediaries

4.1 Insurance Broker4.1 Insurance Broker

An insurance broker means an person, An insurance broker means an person, based on the interests of the applicant, based on the interests of the applicant, provides intermediary services between the provides intermediary services between the applicant and the insurer and receives a applicant and the insurer and receives a commission from insurer.commission from insurer.

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The 10th Largest Insurance Brokers in 1999-2001The 10th Largest Insurance Brokers in 1999-2001

Name of the Brokers Reference VersionsCommissions of the

Brokers

Marsh & Mclennan, UK威达信国际保险顾问（英国）有限公司 1005 million

Willis Group 威利斯集团 728 million

AON UK Holdings 怡 ·安（英国）控股 551 million

Health Lambert Group 赫尔斯 ·兰伯特集团 251 million

Jardine Lloyd Thompson Group 贾丁 ·劳埃德 ·汤普森集团 251 million

Benfield Greig Group 本非尔德 ·格雷格集团 92 million

Alexander Forbes, UK 亚历山大 ·福布斯（英国） 89 million

HSBC Insurance Broker Subsidiary 汇丰保险经纪分公司 88 million

Miller Insurance Group 米勒保险集团 50 million

SBJ Group SBJ集团 38 million

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4.2 Insurance agent4.2 Insurance agent

An insurance agent means an An insurance agent means an entity or an individual delegated entity or an individual delegated by an insurer and to transact by an insurer and to transact insurance business on behalf of insurance business on behalf of the insurance company.the insurance company.

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5. Recent Changes in London Insurance Market5. Recent Changes in London Insurance Market

Original Copanies Merger or Purchase Influence

Royal Insurance Merger in 1996, called Royal & Sun Alliance

Reducing current insurance business substantially in LondonSun Alliance

Commercial UnionMerger in 2000, called

CGNU. In July, it is called Aviva

Withdrawing business in London insurance market in 2000.

General Accident

Norwich Union

Guardian Royal Exchange

Purchased by Axa in 1999Reducing the degree of

participation in London market

Eagle StarPurchased by Zurich in

1997

Reducing the degree of participation in London market

Cornhill Purchased by Allianz in 1986Reducing the degree of

participation in London market

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Clock locating in the center of the first floor.

Overlooking of Lloyd’s outside

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The Gate or The Gate or Entrance of Entrance of Lloyd’sLloyd’s

2020

Overlooking Overlooking of Lloyd’sof Lloyd’s

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Insurance Insurance transactions in transactions in Lloyd’s in the Lloyd’s in the pastpast

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Overlooking of London financial centerOverlooking of London financial center

See the photo next page:

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Mansion house Bank of England Stock exchange Royal exchange Lloyd’s market ILU

Lloyd’s Register of shipping London underwriting center Tower of London

Lombard street

Association of British Insurers

Plantation house

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