Is Titanic Insured by Lloyds insurance broker ?

Exploring uncharted waters of luxury and scale, the Titanic presented a formidable challenge for the insurance industry. The introduction of these grand vessels raised critical questions about how to accurately assess and price insurance coverage for such unprecedented marvels of engineering.

In hindsight, it appeared that underwriters had miscalculated the risks involved. This miscalculation became evident when the Titanic's sister ship, the Olympic, sought insurance coverage for its subsequent transatlantic journey post-Titanic disaster. The cost of insurance more than doubled, indicating a correction in the pricing strategy after the tragic events surrounding the Titanic.

Beyond the realm of insurance premiums, a divergent financial narrative unfolded for the families affected by the Titanic disaster. Those who had wisely secured life insurance policies received significant payouts, often substantial in size. In contrast, families without insurance found themselves grappling with relatively meager compensation. This disparity underscores the profound impact insurance decisions had on the post-tragedy financial destinies of those closely tied to the ill-fated voyage.

The Ship

In the early 1900s, transatlantic passenger lines flourished as lucrative enterprises, primarily driven by the surge in international travel and a significant influx of immigrants, particularly into the United States from Europe. Consequently, ocean liners underwent a phase of expansion, with the introduction of the German ship Kaiser Wilhelm der Grosse marking the onset of a new era in ocean travel. This vessel, the largest and fastest of its time, prompted the British Cunard Line to respond by constructing two formidable ships, the Lusitania and the Mauretania, to compete with the German counterparts like the Kaiser Wilhelm.

In 1907, Harland & Wolff, a Belfast shipbuilder, successfully persuaded a director at the White Star Line that they could surpass the size of Cunard's vessels. This proposition aligned perfectly with the company's objectives, leading to the commencement of construction within six months. As a competitor to Cunard, the White Star Line was under the ownership of J.P. Morgan's International Mercantile Marine Company. The result was the introduction of three colossal ships built by Harland & Wolff: the Olympic, the Titanic, and the Gigantic. The renowned RMS Titanic set sail in the summer of 1911. This new generation of larger and more intricate vessels posed unprecedented challenges for marine insurance underwriting.

Insurance

In January 1912, Willis Faber & Co. assumed the responsibility as the broker commissioned by the White Star Line to secure insurance for both the Titanic and its sister ship, the Olympic. Venturing to Lloyd's of London, a venerable insurance marketplace in the city primarily dedicated to marine insurance for over two centuries, the brokers arranged coverage for the vessels at only half of their total value. Each ship procured £1 million in coverage for losses exceeding £150,000 related to the hull and machinery. The premium for this coverage at Lloyd's was set at 15 shillings per hundred pounds covered, equating to 0.75%. While this cost was remarkably low, it might not have been unexpected given the widely held belief in the ships' purported unsinkability.

Ships covered at Lloyd's were underwritten by syndicates of underwriters, with the Titanic benefitting from coverage by seventy insurers, predominantly based in Britain. This collective group played a pivotal role in overseeing the majority of marine insurance underwriting activities in London. British Dominions Marine Insurance stood as a notable exception, abstaining from participation due to the underwriter's reservations about the Titanic's low waterline.

The participating insurers were documented on a 'placement slip,' which, for the Titanic, opened to offers on January 9, 1912. Remarkably, within the first day, over half of the risk brokered by Willis Faber & Co. found placement with insurers, and the remaining coverage was secured before the conclusion of three days. Individual underwriters assumed portions of the £1 million risk, ranging from as little as £200 to as substantial as £75,000. Separate coverage was arranged for the ship's cargo and mail, both also underwritten at Lloyd's.

Titanic Placement Slip

Sinking

On its inaugural journey, the Titanic transported 1,317 passengers and 905 crew members across the Atlantic. Unfortunately, on April 14, 1912, the ship collided with a submerged spur of an iceberg, leading to its sinking in approximately two and a half hours. Tragically, over 1,500 of the 2,222 passengers and crew on board perished in the disaster.

Meanwhile, in London, Lloyd’s had made strategic investments in wireless telegraphy to stay informed about events at sea. The Lloyd’s wireless radio station, Cape Race, located in Halifax, Nova Scotia, held the distinction of being the first on land to receive news of the Titanic's sinking. As the information reached London, anxious underwriters at Lloyd’s awaited further updates on the unfolding tragedy.

Titanic page from the Index to Lloyd’s List, which summarized reports related to the ship, the collision and sinking (foundering’) of the Titanic are reported in blue ink above the 2^nd line

Despite the initial message indicating the sinking of the Titanic, early reports were conflicting. Some suggested that the ship was being towed to Halifax with no loss of life. This conflicting information led to a significant drop in the cost of reinsurance, falling to under 25% from its earlier level of 60%. Unfortunately, the reality was that the ship had already been at the bottom of the sea for hours.

Surprisingly, some newspapers continued to report that the Titanic was safe, even as late as April 16, two days after its sinking. Regardless, on April 16, the Titanic was officially entered into the 'loss book' at Lloyd’s, documenting serious losses that impacted Lloyd’s underwriters.

Claim

At Lloyd’s, the sinking of the Titanic remains one of the most financially burdensome single disasters in its history. Nevertheless, Lloyd’s insurers promptly settled the Titanic-related claims of the White Star Line within thirty days. This payout, despite constituting 20% of the marine insurance market’s premium income for that year and about 15% of the total amount disbursed for all marine claims in 1912, demonstrated Lloyd’s commitment to addressing the aftermath of the catastrophe. Subsequently, when the Titanic’s sister ship, the Olympic, embarked on a new transatlantic crossing, its premiums surged to 2.0%, a stark increase from the Titanic’s 0.75%.

However, not everyone benefited equally from insurance. Families of the deceased crew members received relatively meager compensation. Despite survivors and the families of the deceased filing claims totaling $16 million, the White Star Line managed to settle for just $664,000.

In addition to this, American life insurers honored substantial policies held by some of the wealthier passengers. For instance, the $50,000 policy of a Philadelphia businessman among the Titanic’s casualties was paid to his wife, marking one of the largest individual life insurance payouts up to that point. The Titanic disaster also spurred an increase in the demand for life insurance, a development that was not surprising given the circumstances.

Moreover, the sinking of the Titanic led to an unprecedented claim for a car damaged in a collision with an iceberg. A survivor filed a claim for $5,000 to compensate for the loss of his 25 horsepower Renault, left on board the ship. This incident marked the first-ever claim for car damage resulting from a collision with an iceberg.