During the reign of Queen Elizabeth the first there was an economic boom in England. There had never been so many rich and successful people in court and the demand for luxuries from around the world grew rapidly.

To cater for this increased demand, English merchants would charter cargo ships to sail to far flung countries in order bring back exotic goods for the courtiers to enjoy.

Tempestuous Seas

But sea travel was extremely treacherous. The weather was highly unpredictable and many ships never returned having been sunk in the heavy gales at sea.

Most journeys were very long and sometimes took years. Supplies would run short and crews would often mutiny. They would take over the ship and any cargo it might have for their own profit.

Sometimes these merchant ships, filled with rich cargo, might find themselves the victim of a pirate attack. Spanish pirate ships would lie in wait in the Bay of Biscay, off the coast of Spain, to plunder any merchant ships on their way back to England.

All this made life very difficult for the merchantmen whose livelihood depended on their ships returning safely with their cargo in tact.

A Need for Insurance

London in those days was a thriving seaport. So merchantmen plied their trade in the streets of the City near to the dockyards. The most popular venues for trade were the numerous coffee-houses in the city. Here the merchants would sell their wholesale goods to shopkeepers.

It was also in these coffee-houses that merchants would complain bitterly about the number of losses they were sustaining as a result of cargoes being lost at see.

It was clear that the merchantmen required some kind of insurance.

And some businessmen began to make deals whereby they promised to reimburse to the merchantmen the value of the cargo if it did not arrive at port in a fit state for sale.

In return for this insurance they demanded a premium. The value of the premium varied with the value of the cargo and more importantly with the risk being undertaken.

The premium for a short journey that did not go past Spain, for example, would be less than for a long journey across the Bay of Biscay and round the southern tip of Africa.

Those that offered the insurance, the underwriters, would hope to make money on the shorter less risky journeys in order to pay for the losses made on the longer more risky ones. It became a very profitable business and it grew rapidly.

Lloyd’s of London

One of these coffee-houses where underwriting took place was owned by Henry Lloyd. His coffee-house was located in Lombard Street, which was close to the docks and so underwriting was very popular at his premises.

Each morning Lloyd used to send his waiters down to the dockside to bring news of the new ships that had arrived that night and he used to post this information on the walls of his coffee house. This became known as Lloyd’s List and was soon being published as a daily newspaper with that name.

As time went on insurance became extremely popular. After the Great Fire of London, in 1666, insurance protection for property was provided by new insurance companies as well as at Lloyd’s.

The little coffee-house in Lombard Street quickly became too small to house all the underwriters and the premises were moved to a room above the stock exchange with box like tables and benches. These tables became known as boxes and the room became known as the underwriting room or just the room.

Today the staff in Lloyd’s are still called waiters, although food and drink are not allowed in the room during office hours. A strange irony considering it’s coffee-house origins.