Whenever I think of Lloyd's of London, the image that immediately comes to mind is of gentlemen sitting around tables in a crowded coffee house trying to set up bills of lading for their cargoes at sea.

I can hear them shouting at each other as each voice wants to be heard over the other.

I imagine the room full of cigar smoke and lots of laughter as egos as large as the coffee house vie for attention.

Those were the days when the gentleman's agreement held over all other.

Those were the days when the contract of utmost good faith meant just that - when gentlemen agreed on the terms and conditions of a deal whether the paper was signed or not, the deal was the deal.

And there was no way around it because no gentleman wanted his integrity questioned.

It was in this smoky, noisy room that insurance as we know it today was created.

It is for this nostalgic reason that I do not want to see the demise of Lloyd's.

Lloyd's to me is the grandfather of insurance. It is the premise upon which all other insurance was created.

Without Lloyd's, I fear the whole concept of insurance would be shaken because who would have faith in it anymore if the institution that was responsible for starting it all was not able to adapt to the modern ways of doing business.

Lloyd's is one of the most unique institutions in the world.

It is comprised of individual underwriters operating underwriting syndicates under the collective umbrella of Lloyd's.

Syndicates are groups of investors called Names.

They are controlled and operated by a managing agent who employs the underwriter.

The underwriter writes insurance on behalf of the syndicate.

Brokers are responsible for preparing the slip detailing the nature of the risk, which is then shown to the underwriter.

Once a slip is underwritten and agreed by the underwriter, the broker will then issue a cover note and collect the premium from the policyholder, which is, forwarded to the underwriter.

Individual syndicates are fierce competitors of each other despite operating side by side within the Lloyd's institution.

Through its underwriting syndicates, Lloyd's has been known to underwrite just about any risk imaginable, including insuring models' legs, musicians' voices and all sorts of other weird risks.

Where would these exposures go if Lloyd's was no more?

Putting nostalgia aside, a more serious reason I would not like to see the demise of Lloyd's is because all other jurisdictions outside of the United States would be subject to heavier scrutiny.

The reason this would happen is because the majority of Lloyd's' customers and a percentage of its Names come from the United States.

The US government would be pressured to act to prevent other policyholders that purchase coverage outside of its regulatory environment from losing out on insurance coverage in the future.

This means Bermuda could see its favourable tax treaty scrapped by the US.

The regulatory environment in the US could change the rules on how insurance is placed outside of the US for companies domiciled there.

This could also mean trouble for Bermuda.

It is for these reasons that we see so many corporations including competitors of Lloyd's actively bailing it out because its demise would be far more destructive than trying to keep it in business.

So what has happened to Lloyd's and why does it find itself in the mess it is in now?

The principle reason for Lloyd's' complicated mess is because it has been in operation for a very long time.

It has seen and weathered many insurance cycles and the development of legal systems globally.

Its very existence may have contributed to the way some legal systems have developed.

Its policy wording in general is not very well documented and unlike the days when utmost good faith was sealed with a handshake, it no longer stands the test of time.

Lloyd's is often embroiled in legal battles over contract wording which has not been finalised, and in this day and age, unfinished policy wording always works against the insurer and to the insured's benefit.

This leaves Lloyd's holding the bag even when it should not be.

Lloyd's is also being shaken by the developing asbestosis cases, workers compensation and pollution liability cases in the United States.

Three exposures so large that they are even frightening the US government.

It is estimated that asbestosis and pollution claims could exceed $2,000 billion.

That is much more than the $300 billion in assets of the 20 major insurers and reinsurers worldwide.

Therefore, there is no way Lloyd's will have enough money to compensate the many claimants arising out of these gradually developing cases.

Lloyd's is also under pressure because of alleged greedy underwriters within syndicates cheating their Names by diverting funds for their own benefit.

Adam Rafael, a name at Lloyd's and a business reporter, has written a scathing account of where Lloyd's has gone wrong in a book called, The Ultimate Risk.

Now on top of being plagued by old year liabilities, this year alone Lloyd's has been hit by the September 11 terrorist attacks, several major catastrophes including hurricanes, airline crashes, etc., and now the Enron debacle.

Needless to say, Lloyd's is in trouble.

This may be the time for Lloyd's to redefine the way it conducts business.

Maybe it's time for it to become one collective group of underwriters who work together rather than against each other to preserve its heritage.

Maybe it's time for Lloyd's to accept the days of insurance and reinsurance being hidden behind a veil of mystery and secrecy are long gone and it must come out into the open to keep pace with the modern world.

I hope it does in time to preserve its history, prestige and tradition so it continues for another 300 years.

Who knows should Lloyd's survive, its history may once again captivate a young insurance scholar as it once did me when I was first studied the insurance business.

Cathy Duffy is a Chartered Property Casualty Underwriter (CPCU) and is now a freelance writer. She is a former executive of Zurich Global Energy and has 15 years experience in the insurance industry. She writes on insurance issues in The Royal Gazette every Monday. Feedback crduffycwbda.bm.