3. Marine Insurance: Origins and Institutions.
Hannah Farber (Assistant Professor of History, Columbia University).
Chris Kingston (Professor of Economics, Amherst College).
Marine insurance was, and remains, an important component of international trade, and has also frequently played a significant role in many aspects of economic, political, legal and social history. Yet despite its wide-ranging importance, for a long time this important topic remained substantially under-researched. In recent years, however, a growing body of scholarship on marine insurance has been emerging, and there have been a number of important contributions from scholars across a variety of historical disciplines, including economic, legal, financial, and business history. At this stage, conversation among those working in this active and intellectually diverse field is likely to be extremely fruitful.
This panel will explore the development of marine insurance from its origins in medieval Italy, through various markets in Western Europe, to the establishment of London as the world’s leading international underwriting centre, and the early development of insurance in America. Our aim is to bring together a variety of scholars using different lenses and tools to explore the evolution of marine insurance institutions and organisations up to the early nineteenth century. The contributors may discuss aspects of the development of marine insurance in a specific country or city, or broader connecting themes such as the development of international legal principles, institutions or business structures from a comparative or transnational perspective.
The insurance contract in the Italian mercantile doctrine of Modern Age.
Alessia Legnani Annichini (Università di Bologna)
The insurance contract – as it is known – was born in the Middle Age as an answer to the need for security of merchants, especially those who were engaged in maritime traffic. For the first time this contract is dealt with in a sistematic manner by the legal doctrine with Pedro de Santarem’s treatise De assicurationibus (1492).
My speech intends to illustrate how the contract object and the range of risks for which was possible to insure changes and expand between the XVIth and the XVIIIth centuries. For this purpose the research intends to investigate the Italian mercantile doctrine of Modern Age. Essential starting point of my study will be the treatise De assicurationibus et sponsionibus mercatorum (1569) by Benvenuto Stracca – destined to have less fortune than that of Santarem – which, after a wide general explanation, analyzes a maritime transport policy for the mercandises transportation in use in Ancona. The paper will focus on the Ponderationi sulla contrattazione marittima (1692) by Carlo Targa and the Discursus legales de commercio (1707) by Giuseppe Lorenzo Maria Casaregi, and then it will analyze the thought of Domenico Alberto Azuni, author in the XVIIIth century of a Dizionario ragionato della giurisprudenza mercantile, and it will finish with an examination of the treatise Delle Assicurazioni marittime (1786) by the lawyer Ascanio Baldasseroni, who organizes in an effective manner the discipline of the contract.
Marine insurance companies in Naples between the 16th and 19th centuries. Ante litteram discount banks or financial holding companies?.
Paola Avallone (CNR-ISSM)
The insurance institute represents an aspect of not minor importance that has moved maritime traffic in the Mediterranean from antiquity to today. Insurance was born for the sea and the sea evolves. It responded to the demands of a market which, with the opening of overseas businesses, became increasingly demanding and, at the same time, riskier. The Kingdom of Naples, as early as the sixteenth century saw the consolidation of its commercial affairs, which took place mainly through the port of the capital. A port that, like other large markets such as Ragusa, Ancona and Messina, was considered a fundamental stage in the Mediterranean system. The structure of the insurance institute, however, could not remain immobile as business practices evolved. So, also in Naples written rules and unwritten rules governed the insurance practice; over time the written rules took on a predominant role, even for fiscal reasons (Prammatica De Assicurationibus). Immediately after Genoa, Naples had its Real Compagnia di Assicurazioni Marittime in a monopoly regime; a monopoly that, between solid beginnings and continuous liquidity crises, lasted for fifty years.
But insurance, especially maritime, could not remain entangled in a rigid monopoly when elsewhere in Europe the first timid steps towards the industrial revolution had shown the limitation of this system. In the pre-unification years of the nineteenth century, in Naples, as elsewhere in the peninsula, there was a diversification of the activities carried out by the new insurance companies that began to open immediately after the Restoration.
The new insurance companies, apart from the fact that insurance was no longer limited only to maritime shipping but expanded to other branches such as life and fire, also took on a larger financial role, offering credit in the absence of a specialized credit system. The credit demand, which grew as the internal and external market expanded as a reflection of the effects of the first industrial revolution, led to the use of social capital, which otherwise would have remained in the coffers of these companies, in promotions, capital advances and maritime exchanges.
The insurance institute proves to be an instrument of great flexibility in the economy of the Mediterranean countries, anticipating the large insurance companies and the financial intermediation companies, typical products of the modern world. The goal of my contribution will be to give an evolutionary picture of the insurance system in pre-unification Southern Italy, defining maritime insurance companies in the various periods; establishing a possible relationship between the growth of the activities of these companies and the various phases of commercial policy; seeking, where possible, a boundary between the various activities carried out; identifying the various protagonists with the construction of a database of all the shareholders of the companies constituted between 1815 and 1861; trying to understand the existence or absence of partnerships in companies that carried out activities other than insurance.
The rise and fall of the late colonial maritime insurance industry in Cadiz, 1780-1815.
Jeremy Baskes (Ohio Wesleyan University)
While Andalusia had been the center of Spanish Atlantic trade for more than two centuries, its maritime insurance industry remained underdeveloped until the final decades of the eighteenth century, partially due to the continued reliance on bottomry loans, (prestamos a riesgo maritimos). In the 1780s, however, dozens of partnerships dedicated to the underwriting of risk via insurance policies were established, largely replacing bottomry loans. The industry was short-lived, however, due, in part, to the escalation of risk associated with the Wars of the French Revolution and Napoleon. Unprepared to weather such catastrophic losses, many of the underwriters, and in turn the partnerships, went bankrupt. This essay explores the rise and fall of this industry.
The emergence and development of the Amsterdam insurance market during its heyday.
Sabine Go (Vrije Universiteit Amsterdam)
Managing the various risks of long distance trade has been of great importance to merchants and ship-owners; most methods that were applied merely reduced the financial consequences. With the emergence of marine insurances in the Italian city states in the late fourteenth century merchants and ship-owners could transfer the risk of their marine ventures to a third party. Although insurances were not invented in Amsterdam, the Amsterdam insurance market, the city’s insurance market developed into the dominant market of the continent as of the end of the sixteenth century. In Amsterdam, so it was said, all risks could be insured. Merchants from the Mediterranean introduced insuring to Amsterdam and apart from their capital, they brought their knowledge of and experience with insurances when they left the southern Low Countries due to political unrest.
Amsterdam experienced its Golden Age – a era of exceptional economic growth. The institutions that were created by the municipal authorities (such as the Amsterdam Exchange Bank (Wisselbank) and the Beurs (the Exchange)) were of pivotal importance to the success of Amsterdam as commercial centre. How did the insurance market develop in Amsterdam, which parties were involved and how did they interact? How did the authorities influence the market and the various groups of interested parties?
I will focus on the emergence and development of the Amsterdam insurance market during its heyday (sixteenth – mid eighteenth century), and will look in particular at the actors involved and how these groups interacted.
(Title for Hope paper TBA).
Mallory Hope (Yale University)
The earliest marine insurance markets were club-like, formed through interactions between limited circles of agents who were known to one another and shared an ethic of mutual aid. For markets to grow in terms of number of participants and annual value of insured property, capital had to be recruited from outside these circles of local investors, and the diversity of the insured risks had to be expanded. My contribution to the panel will present a case study of the eighteenth-century insurance market in Marseille and will approach the key question, how did institutions in Marseille work to enable foreigners to purchase or underwrite marine insurance from a distance and to pursue their legal rights to indemnity payments or to investigation of dubious claims? Reliable institutions for concluding, archiving, and enforcing insurance policies must have important for attracting outsiders, who had a range of options for arranging insurance coverage.
The paper will present evidence from notarial registers of marine insurance policies in the port to show that a significant proportion of insurance buyers were based outside of Marseille. The policies also reveal the varied nationalities of ship captains, important actors in insurance markets since they were often part-owners of their ships or the cargo they transported, and their testimonies were an essential part of the claims process. Judicial sources will permit a close study of some examples of foreigners petitioning insurers and authorities in Marseille. These sources will also permit a reflection on how we should define a “foreigner” or “outsider” in this context and an assessment of the consequences of such a status. The examples presented will show how well distant insurance purchasers were able to hold insurers in Marseille to their contractual commitments.
Early American Marine Insurance Companies: Capital, Culture, and Institutional Relationships.
Hannah Farber (Columbia University)
The first American joint-stock insurance corporation received a state charter in 1794. By 1815, there were 121 such insurance companies operating in the United States, which had collectively raised (or created, depending on one’s point of view), approximately $39 million in capital. Formed by coordinated groups of well-reputed merchants in a variety of American port cities, these companies came very quickly to appear stable and legitimate. As a result, American merchants began en masse to buy marine insurance at home from the new corporations rather than from abroad, even though they paid higher rates for the privilege. Burgeoning merchant demand spurred the establishment of still more corporations.
Insurance company capital required careful management. An insurance company, like a bank, was obligated to keep large sums in reserve, close at hand. But as insurers knew very well, their money needed to make money of its own. Among the limited set of investment possibilities offered by the vestigial American financial markets and permitted by company charters, the most appealing options were American government securities and stock in the United States’ rapidly proliferating state-chartered banks. Insurers’ extensive investments in banks and government securities shaped the early American financial sector. Insurance companies’ funds allowed the early banks a partial workaround for the capital limitations laid on them by state governments; they created an American banking sector that was bigger, better capitalized, and more secure than it appeared. Insurance companies’ mass investments in government securities, I argue, produced a parallel result: an American state that was bigger, better capitalized, and more secure than it would otherwise have been.
Deeply invested in federal debt and uniquely interested in international affairs, insurance company leaders nevertheless had work to do in their own back yards. Company directors knew that the movement of capital into domestic private and public institutions was necessary for their institutional security, but given the rapidly democratizing political landscape, they also knew that it wasn’t sufficient. While making massive capital investments in bank stocks and government securities, insurance company leaders also launched what we would today identify as a cultural initiative, intended to offset public fears about a variety of concerns: insurers’ political power, their coordination with one another, their specific desires with respect to foreign affairs, and the way they reaped profit from merchants’ anxieties and national weakness—not to mention the longstanding association of insurance with the amoral business of gambling. Insurers’ expensive cultural integration project depended on, and then in turn contributed to, the rapid filling of the new companies’ coffers. Widespread, even transatlantic perceptions of the success of the American insurance sector became a phenomenon that the companies could take to the bank.
“Beetween the devil and the deep blue sea”. From the Civil Basis to the Common Law Form, the Canada Legal Melting-pot of Maritime Transatlantic Insurance.
David Gilles (Sherbrooke University)
It is generally assumed that development of insurance within the common law of England in what will become Canada resulted from the Quebec Conquest and the end of the 1812 war. The history of Canadian common law is intimately tied to the history of Great Britain. In all regions other than Quebec, English common law forms the basis of our laws. In the early eighteenth century, all North American insurance contracts were issued in England. But in the Province of Quebec, merchants and the State still maintained the French legal tradition. Apart from marine insurance, of which there are some traces found in a French policy dating from 1748, the French Regime did not know insurance in Quebec. The terrestrial insurances, as far as they were concerned, were then only governed by custom and general common law. During the nineteenth century, French merchants, English insurance companies and the English colonial power built together Canadian marine insurance through the Commercial section of the Civil Code of Lower Canada, which had been inspired both by the Navy Ordinance, promulgated by Colbert under the reign of Louis XIV, and by the British Marine Insurance Act. Under the Union of Upper and Lower Canada, the matter was considered one of local interest, so much so that those two provinces each had their own mutual insurance law. From 1840 (Union of Upper and Lower Canada), we observe a spirit of reform. Commissioners appointed for the Codification of civil laws of Quebec, considering the insurance law as a matter of civil law, dealt with insurance law in their 7th report and enacted articles 2468 and following of the Civil Code of Lower Canada, which cover the topic entirely. The Civil Code of 1866 was the first true regulation of contractual relationships between insurers and policyholders. This Code was subsequently supplemented by various provincial insurance acts, including the Quebec Insurance Act, 1909, inspired by that of the Province of Ontario. This particular legislative history through civil law and common law singles out marine insurance law in North America.
Risk and Revolution: Marine Insurance and Underwriting Profitability in Boston, 1759-1781.
Chris Kingston (Amherst College)
Marine insurance was vital to the maritime trade on which the rapidly expanding economy of colonial America depended. Particularly during wartime, when the risk of enemy capture greatly magnified the risks to shipping, merchants relied on insurance to pursue lucrative wartime trading opportunities while attempting to shield themselves from the risk of ruin. In the early eighteenth century, American merchants generally purchased insurance in Britain, despite the many inconveniences this entailed. But attempts (apparently unsuccessful) were made to open brokerages in Boston and Philadelphia as early as the 1720s. By the early 1740s, insurance was being transacted in the three major ports of Boston, Philadelphia and New York, and by the late 1750s, there were several active brokerages in each of these ports.
This paper investigates a remarkable manuscript record of 2,874 policies underwritten in the Boston brokerage of Ezekiel Price (1727-1802), between March 1759 and November 1781 to study how the insurance industry operated in mid-eighteenth century America. Price’s records are unusually detailed and complete, and cover a long and eventful period, beginning at the height of the “French and Indian” (or “Seven Years”) War (1756-63), and continuing throughout the eventful period leading to the American Revolution, in which Boston merchants played a key role, and continuing through much of the Revolution itself. The goal of this paper is to use these records to reveal how this business was transacted; how war affected the risks to trade (premiums) during this turbulent period; how the volume of insurance (the number of policies underwritten and the number of underwriters) varied over time, and how it was affected by war; how widely and efficiently the market spread risk; and whether variations in the profitability of underwriting for different groups of underwriters can tell us anything about how well market participants were able to deal with the information asymmetries and agency problems inherent to the marine insurance business at the time.
The Transformation of the Marine Insurance Market in the Seventeenth Century: From Individual Insurers to Control by Insurance Companies.
Jeronia Pons Pons (Universidad de Sevilla)
Recent works bring together advances in the fields of history and economic history in the development of modern insurance. It would be impossible to cite everything published to date here, but nevertheless a sample can be found in the work recently edited by Adrian Leonard (2016). However, the recent historiography is still lacking with regard to one of the events that we consider fundamental to the development of insurance business: the transition from a business dominated by individual insurers up to the seventeenth century to the commercialisation of insurance through joint-stock companies starting in the eighteenth century. This transformation of the market did not only modify the business, but also entailed changes in practice that clashed with contemporary regulations. Some works on small markets show that this transformation could have taken place in the seventeenth century. The domination of the market by insurance companies led to a reduction in transaction costs by eliminating the role of intermediaries (notaries and brokers), while claims payments and lawsuits were diminished by reducing the number of insurers. This change, as others previously, led to the adaptation of legality to actual practice and the acceptance of private agreements between insurers and insured that violated the old ordinances still in force. Thus, the agreement between different companies to sell insurance no longer required the insurance policy to be authorised by a notary. Likewise, private agreements between insured and insurers were introduced that updated the old rules in line with contemporary practices. In the context of the seventeenth-century Spanish insurance market, our objective is to present empirical evidence of how this transformation took place, who promoted the progressive dominance of the insurance companies and the creation of a network of companies that came to control the business, and how this occurred. Finally, its persistence in the eighteenth century is studied.
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