Underwritten Weekly

As of about two o’clock this afternoon, I had no Sunday Nonsense.

Not the usual unfinished one, and not even one I’d written and decided was rubbish, but absolutely nothing.

This was rather inconvenient because, as the more observant among you may have noticed, today is Sunday, and if I am going to my writing club at the pub later I feel I should at least come armed with a draft, rather than relying on them to write the whole bloody thing.

I had spent the week working to the assumption that an idea would eventually occur to me. It’s less a planning methodology and more an act of faith, but it has held up surprisingly well so far. It has, though, got me thinking about plans, the future, and the dangerous assumption that the future gives any consideration to your plan.

Which obviously brings me to Lyon.

In 1914, Édouard Herriot, the Mayor of Lyon, was planning an international exhibition. It was to be a celebration of how modern the city was, how cutting edge its industry was, and how confidently it could show off to large numbers of people who would presumably spend money while admiring it.

Herriot had planned everything. Pavilions, exhibits, timings, budgets.

There was just one thing that worried him. What if it made a loss?

So he got on the 1914 equivalent of the Eurostar, and did the obvious thing. He came to Lloyd’s to ask the room a question:

What if I organise an enormous exhibition and it doesn’t go very well?

No bother, it said. We can insure against that.

Herriot paid a premium of 250,000 francs for a guarantee of three million. Having agreed what was, even by the standards of 1914, quite a lot of money, he expected some paperwork.

He didn’t get it. Instead, the entire agreement was just one sentence, on a slip of paper, written in pencil.

Herriot was troubled by this, and asked whether a lawyer ought to ratify it. He was told, by our friend and hero Cuthbert Heath, that a lawyer was unlikely to make either of them more honest, and that he should put the paper in his pocket and sleep well.

Insurance contract documentation has become marginally more complicated in the intervening years.

Never the less, Herriot went back to Lyon with his piece of paper and had his enormous exhibition.

Sadly, it was about then that the future arrived.

A storm broke over the city. The Rhône flooded, and the bridges to the exhibition went with it. Strikes intervened. And then, because apparently the universe had looked at the developing claims file and decided it lacked ambition, the First World War started.

The confident new century, with all its exhibitions celebrating progress and modernity, was finding out rather quickly how fragile progress is.

Herriot had tried to plan for the future. The future had answered with flood, strike and war. There wasn’t much left of his plan…

But what was left was the promise.

Herriot wrote anxiously to London. Heath sent a loss adjuster over to Lyon, who went through the accounts, worked out what was owed, and wrote a cheque. Herriot described the gesture as having “all the elegance of offering flowers to a lady“.

This is not typical of my own experience with loss adjusters, when they came to value my 1997 P reg VW Polo, so perhaps standards have slipped.

A few days later, Lyon’s treasurer found a problem. The adjuster had got the exchange rate wrong, and Lloyd’s had overpaid by 25,000 francs.

Herriot cabled London immediately to explain, and to ask what to do with the money.

Heath told him to give it to a French war charity.

Herriot’s final word on the matter was: “Now I know what a Lloyd’s signature means.“

I love that line. Not because I think we should go back to writing multimillion-franc guarantees in pencil – an unwise position to hold when your employment depends on making underwriting digital.

I love it because underneath everything we have built in the century since, the core is still sitting there unchanged.

We spend enormous amounts of time and money trying to understand the future. We model it, price it, argue about it, build systems to analyse it, and produce increasingly impressive graphs of what we think it might do.

But insurance only exists in the first place because the only thing we do know is that we cannot know.

Nobody in that Room, when the pencil touched the paper, knew the Rhône would rise. Nobody knew the bridges would go. Nobody knew about the strikes. And nobody knew Europe was months away from war.

They didn’t know. They promised anyway.

That’s the bit that gets me. Our market takes somebody else’s uncertainty and turns it into our promise.

The storm may come. The building may burn. The ship may not arrive. The ground may move under the house. Something may happen tomorrow that neither of us has thought of today.

But if it is the thing we agreed between us, we will be there.

There are grander explanations for why I love this market quite as much as I do. But I love that the whole of it fits into a single sentence, written in pencil, folded up, and put in somebody’s pocket.

Sleep well. We’ve got it from here.

Anyway. I should probably start thinking about next Sunday’s Nonsense.

Have a good week,

Rob

P.S. If anyone would like to insure me against a Sunday on which no idea arrives, I am open to quotes. Deductible negotiable. Premium payable in pints.