BIS central bankers’ speeches  3  development of policy wordings according to the customs of what would become known as Lombard Street. The contracts written around this time – which de-coupled the insurance risk from the financing of voyages such that there was a genuine insurance element – related to popular, often expensive, commodities like woollens, iron and grain. So it is little surprise that disputes arose when adverse events took hold, particularly when risks were written across borders. In addition, it became easy to enter into dishonest practices, for example by finding multiple brokers to write the same risk and then cashing in several policies for the same insured event. This brings us to the first, to my knowledge, serious participation of the British state in the affairs of insurers: disputes. These disputes led to the involvement of the judicial system, with high volumes of cases referred to the Privy Council. When this situation became untenable, the Privy Council established a tribunal (later known as the Court of Assurances) to which seven merchants (along with a Judge of the Admiralty and one civil and one common lawyer) would report twice a week (Monday and Thursday) to resolve disputes. This group had authority from Parliament to commit underwriters to prison if they failed to meet their obligations 7. In 1575, the Privy Council ordered the Lord Mayor to compile some rules since no body of law existed to determine the resolution of insurance disputes.
By the 1970s, an era of supervision – as distinct from regulation – had begun in the UK. The more recent history of insurance regulation over the last century is a major topic in its own right, so I only propose to outline a few points. In 1923, the Industrial Assurance Act introduced a Commissioner to discharge statutory powers on behalf of the Board of Trade, with the idea of specific regulatory bodies introduced 21. By 1946, the regulatory framework had expanded to include motor, aviation and transit insurance and, significantly, the deposit system was replaced by a more sophisticated solvency margin which specified that a particular margin of assets over liabilities should be maintained. 22. A string of high-profile failures in the 1960s and 1970s – including the failure of Fire, Auto and Marine which left 400,000 (mostly motor) policyholders uninsured, and an even bigger failure in 1971 when Vehicle & General, with 1.2 million policyholders, collapsed – led to demands for further reform 23 at a time when a wave of consumer protection laws beyond the insurance sector had put regulation firmly on the agenda in any event. Relatively speaking, up until the 1970s, individuals running insurance companies attracted scarce regulatory attention. This all changed in the 1970s when conditions around the fitness and propriety of senior individuals were introduced.