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Cuthbert Eden Heath OBE, DL (23 March 1859 – 8 March 1939) was a British
insurance Insurance is a means of protection from financial loss in which, in exchange for a fee, a party agrees to compensate another party in the event of a certain loss, damage, or injury. It is a form of risk management, primarily used to hedge ...
businessman,
underwriter Underwriting (UW) services are provided by some large financial institutions, such as banks, insurance companies and investment houses, whereby they guarantee payment in case of damage or financial loss and accept the financial risk for liabilit ...
, broker, and
syndicate A syndicate is a self-organizing group of individuals, companies, corporations or entities formed to transact some specific business, to pursue or promote a shared interest. Etymology The word ''syndicate'' comes from the French word ''syndicat ...
owner at
Lloyd's of London Lloyd's of London, generally known simply as Lloyd's, is an insurance and reinsurance market located in London, England. Unlike most of its competitors in the industry, it is not an insurance company; rather, Lloyd's is a corporate body gove ...
from 1880 until 1939. A relentless innovator and novel risk-taker, he has been called "the father of modern insurance", "the maker of modern Lloyd's", and "the father of non-marine insurance at Lloyd's", having through his actions transformed Lloyd's from a British marine-only insurer to the complex and varied international general and specialty-risk insurer it is today, and having cemented Lloyd's sterling reputation, as a reliable insurer which promptly and fully paid all valid claims, in the U.S. and throughout the world. Heath is credited with originating the following forms of insurance: burglary, jeweller's block, all-risks policies, loss-of-profits after fire, bankers' blanket bond, credit-risk, employer's liability, workmen's compensation, smallpox-if-vaccinated, excess-of-loss, air-raid, earthquake, and hurricane. He did pioneering and detailed research and risk-assessment for insurance he originated, in particular for earthquake and hurricane probability. He also cemented Lloyd's reputation in the U.S. and worldwide by his immediate response to the devastating 1906 San Francisco earthquake and fire: "Pay all of our policyholders in full, irrespective of the terms of their policies." In addition, he originated the solvency audit for members of Lloyd's syndicates, which became mandatory at the company. Heath engaged in numerous civilian services during World War I, including giving his mansion Anstie Grange to the War Office for use as an officer's hospital, for which he was appointed an OBE.


Early life and education

Cuthbert Heath was born in 1859 in Forest Lodge near
Southampton Southampton () is a port city in the ceremonial county of Hampshire in southern England. It is located approximately south-west of London and west of Portsmouth. The city forms part of the South Hampshire built-up area, which also covers Po ...
, England. He was the fourth of seven children of Captain Leopold Heath, a
Royal Navy The Royal Navy (RN) is the United Kingdom's naval warfare force. Although warships were used by English and Scottish kings from the early medieval period, the first major maritime engagements were fought in the Hundred Years' War against Fr ...
officer who achieved the rank of Vice Admiral, became the Commander-in-Chief, East Indies, and was appointed a
Knight Commander of the Order of the Bath The Most Honourable Order of the Bath is a British order of chivalry founded by George I of Great Britain, George I on 18 May 1725. The name derives from the elaborate medieval ceremony for appointing a knight, which involved Bathing#Medieval ...
(KCB). In childhood Cuthbert contracted partial deafness, which prevented him from joining the military as three of his four brothers did. Heath was tutored privately until the age of eight, and then attended Temple Grove School in
East Sheen East Sheen, also known as Sheen, is a suburb in south-west London in the London Borough of Richmond upon Thames. Its long high street has shops, offices, restaurants, cafés, pubs and suburban supermarkets and is also the economic hub for Mortl ...
. He attended
Brighton College Brighton College is an independent, co-educational boarding and day school for boys and girls aged 3 to 18 in Brighton, England. The school has three sites: Brighton College (the senior school, ages 11 to 18); Brighton College Preparatory Sc ...
through 1874, and afterwards, beginning at the age of 16, spent a year in France and a nearly year in Germany, learning French and German.


Career


Entry at Lloyd's and early innovations 1878–1905

In 1878, at the age of 18, Heath became a clerk at Henry Head & Co., a firm of brokers and underwriters at
Lloyd's of London Lloyd's of London, generally known simply as Lloyd's, is an insurance and reinsurance market located in London, England. Unlike most of its competitors in the industry, it is not an insurance company; rather, Lloyd's is a corporate body gove ...
. In 1880, at the age of 21, he was elected an
underwriting Underwriting (UW) services are provided by some large financial institutions, such as banks, insurance companies and investment houses, whereby they guarantee payment in case of damage or financial loss and accept the financial risk for liabili ...
member of Lloyd's, with the backing of a £7,000 deposit provided by his father, and he began underwriting for himself two years later, in 1882. Lloyd's at the time was a
marine insurance Marine insurance covers the physical loss or damage of ships, cargo, terminals, and any transport by which the property is transferred, acquired, or held between the points of origin and the final destination. Cargo insurance is the sub-branch o ...
-only insurer, so Heath was a marine underwriter at first. In 1885 he reinsured
Hand in Hand Fire & Life Insurance Society The Hand in Hand Fire & Life Insurance Society was one of the oldest British insurance companies. History The company was founded in 1696 at Tom's Coffee House in St Martin's Lane St Martin's Lane is a street in the City of Westminster, whi ...
's fire risks, thereby reviving
fire insurance Property insurance provides protection against most risks to property, such as fire, theft and some weather damage. This includes specialized forms of insurance such as fire insurance, flood insurance, earthquake insurance, home insurance, or ...
at Lloyd's, which had previously been discontinued due to high taxation rates. He started Lloyd's first specifically non-marine
syndicate A syndicate is a self-organizing group of individuals, companies, corporations or entities formed to transact some specific business, to pursue or promote a shared interest. Etymology The word ''syndicate'' comes from the French word ''syndicat ...
at Lloyd's in 1885. Heath thereafter became renowned for increasing, and innovating in, Lloyd's non-marine insurance business, which eventually resulted in changing the face of Lloyd's forever. Heath's innovations in the insurance industry began in the late 1880s. By 1889 someone insuring a house for fire had asked Heath if he could also insure it for burglary, which had never been done before. Heath's reply was reportedly a now-famous "Why not?", which became his motto going forward; his principle was "Any risk is insurable at the right price." Around the same time he also began insuring the diamond market, resulting in his creating a "jeweller's block" policy for merchants that covered jewels in transit and on the premises, and an "all risks" jewellery policy for consumers that covered loss or theft. In the late 1880s Heath also invented and offered insurance for loss of profits after a fire, also known as business interruption insurance. This controversial move created a major uproar, and he was summoned by the Chairman of Lloyd's Fire Offices Committee and asked why he was "ruining fire insurance". Heath ignored the controversy. In 1890, in order to increase his business Heath established a firm of insurance brokers, C. E. Heath & Co., which became a substantial independent broking firm with considerable overseas business. In 1890 Heath also wrote the first American risk ever in Lloyd's non-marine market. In 1895 he wrote the first earthquake insurance policy in the U.S. Heath also invented bankers' blanket bond insurance. Heath was the first Lloyd's underwriter to accumulate detailed probability-of-loss statistics, becoming a specialist in the risks he undertook. In order to price catastrophe insurance, he initially collected maps of 100 years of hurricane paths in the West Indies, and made detailed notes in a little black rating book which acquired renown. He did the same for earthquakes, paying to have maps created of past earthquakes in India, and finding records of past earthquakes in South America, China, and the West Indies. He also lent his black book to competitors so they would not naively undercut his rates. In the 1890s Heath also developed credit risk insurance, with the stipulation that the insured had to bear some part of the risk in order to insure prudence and due diligence on the part of the creditor. He established the "8 Principles of Credit Insurance", became the first Chairman of the Trade Indemnity Company, and founded the Credit Insurance Association. He also pioneered employer's liability insurance and
workers' compensation Workers' compensation or workers' comp is a form of insurance providing wage replacement and medical benefits to employees injured in the course of employment in exchange for mandatory relinquishment of the employee's right to sue his or her emp ...
insurance. In 1894, faced with a need for greater capacity for his non-marine insurance business, Heath established the Excess Insurance Company. With an initial capitalisation of £5,000, it was used as a reinsurance backing for his syndicate. The original stated purpose of the firm was "to write marine, fire and accident iabilitybusiness and reinsurance". During the 1901–1902 smallpox epidemic in London, he pioneered smallpox insurance, reducing the premium by 75% if the individual was vaccinated. Prior to the 20th century Lloyd's only secured its marine insurance risks. In 1902 Heath finally persuaded Lloyd's to require security deposits for non-marine business as well; this was implemented in 1903. Heath was also the first to introduce the idea of an audit at Lloyd's; because of the dearth of security for non-marine risks, he required a strict audit of the members of his syndicate, beginning in 1903.


1906 San Francisco earthquake and aftermath

On 18 April 1906 a major earthquake hit
San Francisco San Francisco (; Spanish for " Saint Francis"), officially the City and County of San Francisco, is the commercial, financial, and cultural center of Northern California. The city proper is the fourth most populous in California and 17t ...
, and the resulting fires destroyed over 80% of the city, killed thousands of people, and left half of the population homeless. Misled by local propaganda as to earthquake likelihood, few residents of San Francisco had bought earthquake insurance, but they had bought fire insurance. In the wake of the devastating fires following the earthquake, many insurance companies fought paying their policyholders, often by quibbling over causality (since the insurance was not for earthquakes), or paying only 75% of the amounts due. This led to many lawsuits from policyholders. At least 14 insurers went bankrupt, and some insurers – mostly German and Austrian – simply disappeared and denied all coverage. Heath and his syndicate had insured aggressively in San Francisco, covering about 20% of the total policyholders there. Nevertheless he immediately cabled his San Francisco agent a now-legendary instruction: Lloyd's paid out a staggering $50 million, the equivalent of more than $1 billion in 2010 currency. Heath's action, however, cemented Lloyd's reputation in the U.S. as an insurer that promptly and fully paid all valid claims, and led to a great increase in Lloyd's business there and eventually elsewhere as well. The United States soon became Lloyd's largest market. The catastrophe came at a difficult time for the insurance industry, as the preceding years had left many insurers reeling from several other costly disasters, including the 1903 Chicago fire in the Iroquois Theatre which killed 600 people, the 1904 fire on the steamship ''
General Slocum The PS ''General Slocum''"PS" stands for "Paddle Steamer" was a sidewheel passenger steamboat built in Brooklyn, New York, in 1891. During her service history, she was involved in a number of mishaps, including multiple groundings and collision ...
'' in Manhattan's East River which killed 1,021 people, and the 1904 Great Baltimore Fire which caused losses of $90 million. Additionally, a few months after the San Francisco earthquake and fires there were further catastrophic earthquakes and fires in Valparaiso, Chile and in Kingston, Jamaica. By 1907 Heath therefore devised excess-of-loss reinsurance, to provide insurers with the protection they needed against catastrophe losses like the San Francisco claims. These reinsurance policies paid out only when the loss was above a certain threshold, and put a cap on payments; they also involved layering and retrocession, thereby inventing vertical reinsurance. An additional consequence of the San Francisco earthquake and fire was that in 1908 Lloyd's as a whole adopted Heath's model of a strict and compulsory annual audit of all members' accounts. All underwriters were required to provide certificates of solvency from approved auditors, and premiums were held in trust accounts for the payment of claims. These practices became the cornerstone of Lloyd's solidity for the rest of the 20th century.


Subsequent career 1907–1939

Heath sold the first Lloyd's auto insurance policy in 1907, for American drivers and their cars. In 1912 he sold the first fleet coverage, to a meat-packing company in Chicago. In 1911 he was elected to Lloyd's Committee, its governing body, and served on it through 1915. Also in 1911, non-marine insurance at Lloyd's, which he had initiated and so greatly expanded, was given official legal recognition and status, via the Parliamentary Lloyd's Act of 1911. In December 1911 ''
The Times ''The Times'' is a British daily national newspaper based in London. It began in 1785 under the title ''The Daily Universal Register'', adopting its current name on 1 January 1788. ''The Times'' and its sister paper '' The Sunday Times'' ( ...
'' wrote of him, summarizing his achievements: During the
First World War World War I (28 July 1914 11 November 1918), often abbreviated as WWI, was List of wars and anthropogenic disasters by death toll, one of the deadliest global conflicts in history. Belligerents included much of Europe, the Russian Empire, ...
(1914–1918), Heath engaged in a considerable number of civilian service activities, including donating his mansion for use as a military hospital, for which he was awarded an OBE. Business-wise, in 1915, following
Zeppelin A Zeppelin is a type of rigid airship named after the German inventor Count Ferdinand von Zeppelin () who pioneered rigid airship development at the beginning of the 20th century. Zeppelin's notions were first formulated in 1874Eckener 1938, pp ...
attacks on London, he estimated the number of Zeppelins, the frequency of attacks, the number of bombs each Zeppelin could carry, the damage area of an explosion, and how much of London was built up as opposed to open spaces. After calculating his risks he offered bomb insurance through the end of the war, raising and lowering his premiums with the intensity of the attacks. In 1919 Heath ventured into
aviation insurance Aviation insurance is insurance coverage geared specifically to the operation of aircraft and the risks involved in aviation. Aviation insurance policies are distinctly different from those for other areas of transportation and tend to incorporate ...
, and started the British Aviation Insurance Association. Also by 1919, he was noted as "the leader among the Lloyd's underwriters", with his finger on the pulse of the insurance public. During the 1920s Heath withdrew from daily business at Lloyd's, but his syndicate continued to lead the non-marine market. By the 1930s his annual income was estimated to be £60,000 (), and his syndicate was underwriting for 300 members.


Civilian services during the war

At the outbreak of the First World War in 1914, Heath and his wife were living at Anstie Grange, their 26-room mansion in Surrey that was host to shooting parties, hunts, and balls. Heath immediately began recruiting, speaking at recruitment meetings, giving pep talks at Anstie Grange to local men who volunteered, and setting up a recruitment office at Lloyd's where volunteers could be sworn in. In 1915 he was appointed a Trustee of
Lloyd's Patriotic Fund Lloyd's Patriotic Fund was founded on 28 July 1803 at Lloyd's Coffee House, and continues to the present day. Lloyd’s Patriotic Fund now works closely with armed forces charities to identify the individuals and their families who are in urgent ne ...
, which assists soldiers and sailors in distress and the widows and children of those who have died during military service. As his indoor staff enlisted in the war effort at his encouragement, their number was reduced from 26 to three. He allowed the local rifle club to use his rifle range and supplied them with ammunition, and allowed the London Civil Service Rifles to drill on his grounds. Heath was commissioned, along with
Frederick Huth Jackson Frederick Huth Jackson (1863–1921), was a British banker, and a partner of the merchant bank, Frederick Huth & Co, founded by his great-grandfather, Frederick Huth. Early life He was the son of Thomas Hughes Jackson (1834–1930) and Hermi ...
, Roger Owen, and two others, to create a scheme by which the government could insure the public against losses caused by bombing. The plan was adopted, and he served on the committee that carried it out until the end of the war. In September 1916, Heath gave his mansion Anstie Grange to the
War Office The War Office was a department of the British Government responsible for the administration of the British Army between 1857 and 1964, when its functions were transferred to the new Ministry of Defence (MoD). This article contains text from ...
for use as an officer's hospital. The Anstie Grange Officer's Hospital, also known as the Holmwood Hospital for Officers, was funded by Heath and fully outfitted with the most modern appliances. Dorothy Gore-Brown, a cousin of Heath's wife, was appointed
Commandant Commandant ( or ) is a title often given to the officer in charge of a military (or other uniformed service) training establishment or academy. This usage is common in English-speaking nations. In some countries it may be a military or police ran ...
of the hospital, and his daughter Genesta served as its pantry maid. It became a first-line hospital, receiving patients straight from the
Western Front Western Front or West Front may refer to: Military frontiers * Western Front (World War I), a military frontier to the west of Germany *Western Front (World War II), a military frontier to the west of Germany *Western Front (Russian Empire), a maj ...
. The surgeons and staff totaled 50, and it housed 50 patients at a time; nearly 700 patients passed through the hospital from October 1916 to its closure in December 1918. It gained a reputation as one of the best hospitals in England. In 1919 Heath joined the Committee of the Labour Department, which allotted funds to enable soldiers and sailors, both officers and enlisted men, to be trained for civil employment. As the donor and organiser of the Anstie Grange Primary Hospital for Officers, Heath was appointed
Officer of the Most Excellent Order of the British Empire The Most Excellent Order of the British Empire is a British order of chivalry, rewarding contributions to the arts and sciences, work with charitable and welfare organisations, and public service outside the civil service. It was established o ...
(OBE) in the
1920 New Year Honours The New Year Honours 1920 were appointments by King George V to various orders and honours to reward and highlight good works by members of the British Empire. They were published on 1 January 1920 and 30 March 1920 (referred to as the 1920 civil ...
, for civilian services in connection with the war. In July 1920 he also received a certificate of appreciation from
Winston Churchill Sir Winston Leonard Spencer Churchill (30 November 187424 January 1965) was a British statesman, soldier, and writer who served as Prime Minister of the United Kingdom twice, from 1940 to 1945 during the Second World War, and again from ...
to hang in Angstie Grange, and an accompanying letter, in acknowledgement of the Army Council's gratitude.


Honours

*Elected a Fellow of the
Zoological Society of London The Zoological Society of London (ZSL) is a charity devoted to the worldwide conservation of animals and their habitats. It was founded in 1826. Since 1828, it has maintained the London Zoo, and since 1931 Whipsnade Park. History On 29 ...
(1904) *
Officer of the Most Excellent Order of the British Empire The Most Excellent Order of the British Empire is a British order of chivalry, rewarding contributions to the arts and sciences, work with charitable and welfare organisations, and public service outside the civil service. It was established o ...
, for civilian services in connection with the war (1920) * Knight of Grace of the Order of St John of Jerusalem (1925) *
High Sheriff of Surrey The list of known High Sheriffs of Surrey extends back to 1066. At various times the High Sheriff of Surrey was also High Sheriff of Sussex (1229–1231, 1232–1240, 1242–1567, 1571–1635). 1066–1228 (High Sheriffs of Surrey only) 1229– ...
(1925–1926) * Deputy Lieutenant for the
County of Surrey Surrey () is a ceremonial and non-metropolitan county in South East England, bordering Greater London to the south west. Surrey has a large rural area, and several significant urban areas which form part of the Greater London Built-up Are ...
(1928)


Personal life

In 1886, Henry John Tschudi Broadwood, scion of the founder of
John Broadwood & Sons John Broadwood & Sons is an English piano manufacturer, founded in 1728 by Burkat Shudi and continued after his death in 1773 by John Broadwood. Early history John Broadwood (1732–1812), a Scottish joiner and cabinetmaker, came to London i ...
, married Heath's sister Ada. Heath generously aided the struggling piano company, with both business advice and funds, and in 1902 became its Chairman. In 1891 Heath married Sarah Caroline Gore Gambier (1859–1944). They had two children, Leopold Cuthbert Heath (1894–1966), and Genesta Mary Heath (1899–1990). Upon the death of his uncle Douglas Heath in 1897, he took Kitlands, a small estate near Coldharbour,
Surrey Surrey () is a ceremonial county, ceremonial and non-metropolitan county, non-metropolitan counties of England, county in South East England, bordering Greater London to the south west. Surrey has a large rural area, and several significant ur ...
, on lease from his father, who had succeeded to the estate. During that time he also had a residence in London at 47
Portman Square Portman Square is a garden square in Marylebone, central London, surrounded by elegant townhouses. It was specifically for private housing let on long leases having a ground rent by the Portman Estate, which owns the private communal garden ...
. Upon the death of his father in 1907, Heath inherited his large country retirement estate Anstie Grange, near
Dorking Dorking () is a market town in Surrey in South East England, about south of London. It is in Mole Valley, Mole Valley District and the non-metropolitan district, council headquarters are to the east of the centre. The High Street runs roughl ...
,
Surrey Surrey () is a ceremonial county, ceremonial and non-metropolitan county, non-metropolitan counties of England, county in South East England, bordering Greater London to the south west. Surrey has a large rural area, and several significant ur ...
, and moved there with his wife and two children. Anstie Grange, between Holmwood and Coldharbour, was a 26-bedroom mansion which had been purchased and remodeled by Heath's father in 1863. It had a staff of 50, including 26 indoor staff plus gardeners, stablemen, chauffeurs, and gamekeepers. Heath's wife entertained lavishly, hosting shooting parties, hunts, balls, and other gatherings for London's social élite. Heath also maintained a London residence at 15 Aldford Street in
Mayfair Mayfair is an affluent area in the West End of London towards the eastern edge of Hyde Park, in the City of Westminster, between Oxford Street, Regent Street, Piccadilly and Park Lane. It is one of the most expensive districts in the world ...
. In 1929 he donated 200 acres near
Leith Hill Leith Hill in southern England is the highest summit of the Greensand Ridge, approximately southwest of Dorking, Surrey and southwest of central London. It reaches above sea level, and is the second highest point in southeast England, after ...
, Surrey to the
National Trust The National Trust, formally the National Trust for Places of Historic Interest or Natural Beauty, is a charity and membership organisation for heritage conservation in England, Wales and Northern Ireland. In Scotland, there is a separate and ...
for conservation. Heath enjoyed fishing, shooting, and hunting. He funded Surrey Union Foxhounds during the war, and in 1918 he became its joint master. He was a member of several gentlemen's clubs in London, including the Sesame Club, the Windham Club,
Boodle's Boodle's is a London gentlemen's club, founded in January 1762, at No. 50 Pall Mall, London, by Lord Shelburne, the future Marquess of Lansdowne and Prime Minister of the United Kingdom. History The club was originally based next door to Wi ...
, the
City of London Club The City of London Club was established in 1832 and is the oldest of the gentlemen's clubs based in the City of London. Its Italian Palladian-style building was designed by English architect Philip Hardwick. Prince Philip, Duke of Edinburgh, wa ...
, the
Ranelagh Club The Ranelagh Club was a polo club located at Barn Elms in south west London, England. It was founded in 1878 as a split-off from the Hurlingham Club and by 1894 was the largest polo club in the world. The club had approximately 3000 members in 1 ...
, and the
Royal Automobile Club The Royal Automobile Club is a British private social and athletic club. It has two clubhouses: one in London at 89 Pall Mall, and the other in the countryside at Woodcote Park, near Epsom in Surrey. Both provide accommodation and a range ...
. In 1910 he was elected to membership of the
Royal Yacht Squadron The Royal Yacht Squadron (RYS) is a British yacht club. Its clubhouse is Cowes Castle on the Isle of Wight in the United Kingdom. Member yachts are given the suffix RYS to their names, and are permitted (with the appropriate warrant) to w ...
, and in later years often sailed his yacht in winter in the Mediterranean. In 1930 he purchased a small estate, La Domaine de Savaric, in
Èze Èze (; oc, Esa; it, Eza) is a seaside commune in the Alpes-Maritimes department in the Provence-Alpes-Côte d'Azur region in Southeastern France. It is located on the French Riviera, 8.5 km (5.2 mi) to the northeast of Nice and 4.5 km (2.7 mi ...
in the Alpes-Maritimes, France. His pastimes also included country walks, reading, and water colour painting. In 1938 Heath suffered a stroke, which left him partially paralysed. He died at Anstie Grange in March 1939. His memorial service was attended by almost every major financial figure in London, and letters of condolence poured in from the U.S. and all over the world. In its memorial tribute, ''
The Economist ''The Economist'' is a British weekly newspaper printed in demitab format and published digitally. It focuses on current affairs, international business, politics, technology, and culture. Based in London, the newspaper is owned by The Eco ...
'' called him "the first man to see the potentialities of insurance in the modern world"; it continued: "There are few departments of our modern life, which have not been touched at this point or that by his inventive genius. He had in him every element of greatness – intellect, character, vision, courage and a deep personal humility."


References


Further reading

*Brown, Antony. ''Cuthbert Heath: The Maker of Modern Lloyds''.
David & Charles David & Charles Ltd is an English publishing company. It is the owner of the David & Charles imprint, which specialises in craft and lifestyle publishing. David and Charles Ltd acts as distributor for all David and Charles Ltd books and cont ...
, 1980. {{DEFAULTSORT:Heath, Cuthbert 1859 births 1939 deaths Insurance underwriters Officers of the Order of the British Empire High Sheriffs of Surrey Deputy Lieutenants of Surrey Knights of Grace of the Order of St John Fellows of the Zoological Society of London People from Holmwood Businesspeople from Southampton Businesspeople from London People educated at Temple Grove School People educated at Brighton College Insurance in the United Kingdom British businesspeople in insurance