Rapid structural change resulting from system collapse is less common in insurance than in the history of other financial institutions. One exception was the crisis at the Lloyd’s insurance market in the late twentieth century. Hitherto, explanations of the crisis have focused on the effects of catastrophic losses and poor governance. By drawing on existing insider accounts of the crisis, and by constructing the first comprehensive analysis of the public and political response to the crisis, this book argues that multiple delusions of competence were also at work. Arrogance, elitism and defence of vested interests comprised endogenous elements of the crisis. Entrenched ideas about the virtues of self-regulation, and faith in insider experts also played a role. The result was a misdiagnosis of what ailed Lloyd’s, and a series of reforms that failed to address the underlying causes of its disease.
Pearson, R. (2022). Delusions of Competence: The Near-Death of Lloyd’s of London 1970 - 2002. Champaign Illinois: Palgrave Macmillan. https://doi.org/10.1007/978-3-030-94088-1