Letters from London (32 page)

What happens, I asked her, if you smell a rat? “If we smell a rat, we sniff around.” Business accounts might disclose complicated loans, or the Name might prove reluctant to let the committee talk to his bank. “But most of our Names are very straight,” she insists. “They are mostly modest people in distressed circumstances. They say,
‘Give me finality.’” A caseworker I talked to confirmed this: instances of attempted deceit seem rather minor and incompetent—a zero missing from an interest payment, or “putting down under expenses three television licenses on one property” (under British law you need only one license per property). Though the caseworker confirmed that “we still get a certain amount of bitterness creeping in, especially among the older Names who’ve lost their life savings,” the process, as described at Gun Wharf, is necessarily painful but comparatively untroubled: honorable Names seeking to have a line drawn under their troubles, trusting Lloyd’s even in their financial extinction, sheep coming docilely to the final shearing. This may indeed be the case—so far. It may be that the committee has only seen the smaller fry, a likelihood endorsed by the fact that half the Names coming to The Hardship have a bank guarantee on their house (the rule-bending way of showing wealth in the eighties). It may also be that only those least tempted by dishonesty have come forward as yet, or that feelings of rage weaken and fiendish plans seem less plausible when faced with the bureaucracy of Gun Wharf. There did, even so, seem a huge disparity between the view from the banks of the Medway and the opinions I heard among the burnt.

B
UT THEN THE FURTHER
you go into the Lloyd’s story, the deeper the incompatibility of views you meet. Names coming honorably to settlement, or Names doing their utmost to get off the hook? A decade of high-level Masonic conspiracy against the external Names, or just a decade of lolloping incompetence? A linked series of individual tragedies blasting its way like HIV through the upper-middle class, or merely a moral-free demonstration of “one lot of rich people stealing from another lot of rich people” (as a carbonized Name put it to me)? Assessing the true extent of the social and financial trauma is tricky. As you talk to Lloyd’s Names and those close to them, you frequently hear of depression, marital breakdown, even suicide; of estates being sold, children taken out of school, and vertiginous downward mobility. Occasionally, the stories have a comic edge: I was told of one Name whose vivid taste for serial marriage
was finally quenched when, anticipating possible losses, he put all his assets in his wife’s name; now he lives in fretful dependence on a woman who would normally have passed her sell-by date. But mostly the tales are painful ones, often terminating in a statement like “an entire swath of English society has been wiped out.” If Lloyd’s melted down, and every member went bankrupt, such a statement would certainly be true: the membership still embroiled in one way or another is about thirty thousand, which happens to be roughly the number of entrants in the current edition of
Who’s Who
. But we are far from this figure at the moment. It must seem like “an entire swath” to Lloyd’s sufferers because Names tend to know other Names (that is, after all, how they became Names in the first place). “Wiped out” also has its gradations: sometimes a husband will have put his wife up as a member and stayed out of Lloyd’s himself, thereby limiting the family’s potential loss; while the “losses” are usually of those things—private education, second homes, skiing holidays—which seem to others gross and unwarranted social privileges in the first place. Finally, it’s hard to quantify loss after you factor in stiff-upper-lipdom. One Name who had been obliged to sell part of his prized book collection sanguinely quoted to me the dictum “Don’t cry over things that can’t cry for you.” And an underwriting agent told me of the following quintessential exchange he had overheard between two City gents as he was leaving his luncheon club. “How are you, old chap?” asked the first gent, to which the second, with a sad shake of the head, merely replied, “Lloyd’s, I’m afraid.”

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.”

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.”