Magazine article Financial History

FROM TIME OUT O F MIND: A Brief History of Marine Insurance

Magazine article Financial History

FROM TIME OUT O F MIND: A Brief History of Marine Insurance

Article excerpt

If any ship, or other vessel, by any casualty or misfortune happens to be wrecked and perish, in that case, the pieces of the hulk of the vessel, as well as the lading thereof, ought to be reserved and kept in safety for them to whom it belonged before such disaster happened, notwithstanding any custom to the contrary.

- The Rules of Oléron (c. 1266) Article XLVI, according to the Admiralty and Maritime Law Guide

Financial history has most often been taken to be the history of money, banking and lending, and stock markets. Fair enough, but insurance deserves equal billing. It is a widely-held belief by insurance professionals and researchers that marine insurance - hull and cargo specifically- are the oldest forms of insurance. Some date early forms of those to Phoenician traders whose heyday of trading colonies around the Mediterranean began around 1200 bc. The French port of Marseilles was among the farthest west, founded around 600 bc.

Trade over those distances, with voyages lasting weeks and months, clearly involved risks greater than local trade, terrestrial or maritime. The history of business has been driven by the need to concentrate capital. That also means a concentration of risk. The history of insurance has been driven by the concurrent need to transfer and diffuse those concentrated risks.

A prize document in financial history has long been the oldest-known share certificate, representing stock in the Dutch East India Company, dated 1606. But marine insurance has that beat by two and a half centuries.

"The first formal marine insurance policy that we would recognize today as such was from 1350," said Rod Johnson, director of marine risk management at RSA Global Risk, a major UK underwriter. He also sits on the loss-prevention committee of the International Union of Marine Insurers.

"Marine insurance is based on agreed levels of uncertainty," Johnson explained. "The owner of the vessel and the shippers of the cargo know where the vessel is supposed to go, but they don't know exactly where it is or what it is doing at any moment. Neither do the insurers."

Those earliest formal policies built on the earliest attempt at international maritime law. According to Medieval Maritime Law from Oléron to Wisby: Jurisdictions in the Law of the Sea, by Edda Frankot (University of Groningen/University of Aberdeen), "the most famous medieval sea laws are probably the Rôles d Oléron (or Jugemens de la mer [Judgments of the Sea]), which are named after a small island off the coast of the medieval duchy of Aquitaine." They are also known as The Rolls or Rules of Oleron.

"They were drawn up in French in or shortly before 1286 and contain regulations for the wine trade from Brittany and Normandy to England, Scotland and Flanders," Frankot wrote. "The two oldest extant manuscripts containing the Rôles, both from the early 14th century, are of English origin. A mention of the laws in a report written in the 12th year of Edward Ill's reign (1329) confirms that the laws were in use in England in the first half of the 14th century. In France, the Rôles d'Oléron had been adopted as the official sea law by 1364."

There is evidence of insurance-like risktransfer agreements from Amsterdam in 1598, Antwerp in 1555 and Barcelona in 1484. And indeed, Marine Insurance: Origins and Institutions, 1300-1850 (Adrian Leonard ed. 2016) cites a 1601 quote from Sir Francis Bacon (1561-1626) that marine insurance had existed from "time out of mind."

While it is happenstance that centuriesold ephemera such as stock certificates or contracts have survived to provide original source material today, court records are meticulously kept. According to Robert Merkin, et al. in Marine Insurance Legislation (5th ed. 2014), "There are reports of marine insurance cases coming before the English courts in the 16th and 17th centuries, and it is clear from the early cases that the courts were prepared to enforce marine policies according to their terms. …

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