Risky Business: An Insider's Account of the Disaster at Lloyd's of London.

• Author: Gwynne, S.C.
• Position: Review

Risky Business: An Insider's Account of the Disaster at Lloyd's of London

Martin Mayer and Elizabeth Luessenhop Simon & Schuster, $25

You may know Lloyd's of London as the venerable, old-line British insurance house where the employees wear red tailcoats with brass buttons and where policies are written on all sorts of oddball risks that no one else has the imagination to insure: Betty Grable's legs, Bob Feller's fastball, the Space Shuttle, offshore oil rigs, and the Dallas Cowboys. This is the quaint Lloyd's of commercial legend: the company that would insure anything, and make money on it; the company that, out of its own deep sense of honor and tradition, never failed to pay off a claim.

This is also the company that is now plunged into a desperate scandal that is already counted in the tens of billions of dollars. It may soon enough destroy one of the world's oldest and most successful commercial institutions. Thousands of investors have already been mined, and the lawsuits, claims, and counterclaims against Lloyd's, its agencies, managing companies, and brokers have become thickly layered and intricately interlaced. How Lloyd's fell--from the world's most respected insurance underwriter in 1980 to the blundering scapegrace we see today--is the subject of Risky Business: An Insider's Account of the Disaster at Lloyd's of London by Martin Mayer and Elizabeth Luessenhop.

Luessenhop is indeed an "insider," one of the thousands of American sponsors of Lloyd's insurance syndicates who lost money, and she is out to expose the perpetrators. Martin Mayer is the veteran financial writer whose book The Bankers is one of the best primers ever written on the banking industry. At its best, Risky Business cracks along in a clean, friendly narrative style. At its worst, which is not infrequent, the authors indulge at length in the sort of adversarial and highly complex legal minutiae one might expect from an "insider" in several of the lawsuits against Lloyd's. But Luessenhop and Mayer do not claim to be neutral or objective; they aim to show how $29 billion in insurance liabilities got hung on 33,000 people who will never be able to pay them off, and how Lloyd's has lost enough to wipe out all of its profits since World War II. The tale, regardless of an occasionally bumpy narrative, is still riveting.

It begins with what most of us would consider financial legerdemain: the way wealthy investors made money by putting up the capital behind the...