Delusions of Competence: The Near-Death of Lloyd's of London 1970--2002

This book explores the Lloyd's of London insurance market crisis of the late 20th century, focusing on the public and political response. It argues that multiple delusions of competence, arrogance, elitism, and defense of vested interests contributed to the crisis and that reforms failed to address the underlying causes. It offers a lesson about the importance of transparency, accountability, and effective monitoring of financial institutions.

Format: Hardback
Length: 136 pages
Publication date: 10 February 2022
Publisher: Springer Nature Switzerland AG

This book delves into the crisis that engulfed Lloyd's of London, a venerable insurance market that nearly collapsed in the late twentieth century. While rapid structural change resulting from system failure is less prevalent in insurance compared to other financial services, the Lloyds crisis stands as a notable exception. Previous explanations of the crisis have primarily focused on the consequences of catastrophic losses and inadequate governance. By drawing on contemporary accounts of the crisis, the author undertakes the first comprehensive scholarly analysis of the public and political response. The book employs theoretical concepts from behavioral economics and economic psychology to argue that multiple delusions of competence were at play within and outside the Lloyds market. Arrogance, elitism, and the defense of vested interests formed endogenous elements of the crisis. Entrenched ideas about self-regulation and faith in insider experts also played a role, leading to a misdiagnosis of the underlying issues by both insiders and politicians. Consequently, a series of reforms were implemented, yet they failed to address the root causes of Lloyds' disease. This book serves as a cautionary tale from recent history, emphasizing the significance of transparency, accountability, and effective monitoring of financial institutions. It holds interest for academics and students studying economic and financial history, business, insurance, political economy, and history in general.

Weight: 333g
Dimension: 210 x 148 (mm)
ISBN-13: 9783030940874
Edition number: 1st ed. 2022