The Origins and History of Insurance, Part I: From the Bronze Age to the Middle Ages

Insurance has grown from the natural instinct of merchants in the earliest times to apportion risk, to a business of local, single-line mutual groups and member societies, and into a world-wide industry of multi-line, multi-state and even multi-national insurance conglomerates and holding companies.
Insurance, in its most basic sense, is an agreement by which one party agrees to undertake the risk of another party for compensation. The core concept of insurance, however, is spreading risk – essentially, not keeping all of one’s eggs in a single basket. This concept goes back to ancient times, probably before the beginning of recorded time.

Ancient History

Some sources point to the origins of insurance as beginning in the Early Bronze age, during the 3rd millennium BC, when Chinese merchants would spread their goods out among several different ships to limit their risk if any one ship would sink or capsize. However, an agreement resembling “bottomry” or “respondentia” that developed in early Babylonian law is more commonly recognized as the first prototype insurance contract.[1][2]

The origins of insurance as a concept can be traced back to the Chinese and the Babylonians during the Early Bronze Age.
The Code of Hammurabi, dated to the early 18th century BC, codified an arrangement whereby a merchant would advance goods to a trader on security and at interest, but would also include an additional amount owed by the trader as consideration for the merchant’s declaration that, if the goods were lost or stolen during transport due to no fault of the trader, the trader would be free of all debt to the merchant.[2][3]

The contract of bottomry developed in Greece sometime after the 3rd century BC, and is generally traced back to the above-referenced provisions in Hammurabi’s Code. Bottomry was a loan secured by a ship with an interest rate on the loan as well as an additional premium charge in exchange for potential loss of the ship and cancellation of the debt. The contract of respondentia developed in conjunction with bottomry, and was essentially the same except it was centered on the cargo and freight of the ship rather than the ship itself.[2][3]

Bottomry was a loan secured by a ship with an additional premium charge in exchange for potential loss of the ship and cancellation of the debt.
Bottomry and respondentia contracts continued to evolve during the Greek Era and up through the Roman Empire. Records indicate that the Romans had agreements of private guarantee for the safe delivery of goods and contracts for indemnification that were not confined solely to maritime risks. There is also some evidence that agreements somewhat similar to life insurance were made by the ancient Persians and Romans. This consisted primarily of groups or guilds that would pool assets to provide funeral benefits for their members.[2]

The development of insurance in general continued as trade and industry spread and civilizations became more advanced. Most insurance was either ancillary to contracts of loan or other arrangements, or it was mutual in nature (e.g., a group of merchants would each pay a small amount into a general fund to reimburse any one of them from loss).[2][4]

Medieval History

Generally, the oldest recorded contract of insurance is believed to be a document from 1343 found in the state archives of Genoa (an independent city-state in what is now northern Italy). During this period, insurance developed as a separate contract for the first time, independent from loans, shipping arrangements and investments.[4][5]

The oldest recorded stand-alone contract of insurance is dated in the year 1343.
The Renaissance was a time of significant growth and development in the structure and business of insurance. Blaise Pascal and Pierre de Fermat developed theories quantifying probability during the 17th century, and those theories formed the basis for actuarial science – the sole method for issuing insurance in modern times.[3][6][7] The astronomer Edmund Halley developed the first mortality table in 1693 and Joseph Dodson supplemented it to provide for premium scalable by age in 1759.[7][8][9]

The modern concept of fire insurance arose from the Great Fire of London in 1666. The runaway blaze burned for days, gutting the city and causing massive property damage. Shortly thereafter, Nicholas Barbon established the first insurance office in London, and he is widely considered one of the pioneers of fire insurance.[3][10]

Lloyd’s of London was formed in a coffee house in 1688 and soon became the insurance capital of the world, issuing policies across Europe and eventually, across the world.[3][6] The modern concept of health and disability insurance has its roots in proposals by Hugh Chamberlain in 1694.[11]

The first stock insurance company was formed in England in 1720. A mutual insurance society known as the Hand-in-Hand Mutual Fire Company was formed in 1696, and the current global insurance company Aviva traces its roots back to Hand-in-Hand.[12][13] The oldest documented insurance company still in business today (under some form of its original brand) was formed in 1710.  Initially known as the Sun Fire Office, it is now known as Royal & SunAlliance (RSA) and it is Britain’s largest insurance company.[13][14]

Formed in 1762, the Society for Equitable Assurance on Lives and Survivorship was the first life company to use the level premium system and scientifically calculate premium rates for life insurance policies.[14]

1. Risk Management; Emmett J. Vaughan (1992).
2. The Origin and Early History of Insurance Including the Contract of Bottomry; C.F. Trenerry (2009).
3. Insurance and Prevention: How and Why; Donald L. Ungarelli (1984);
4. Dictionary of International Trade; Edward G. Hinkelman; 8th Edition (2008).
5. The Earliest Insurance Contract – A New Discovery; Humbert O. Nelli; the Journal of Risk and Insurance (1972).
6. The History of Insurance, AD Edition; Ryan Looney; esuranceblog,com (2010);
7. An Introduction to the History of Mathematics; Howard Eves (1990).
8. An Estimate of the Degrees of the Mortality of Mankind, Drawn from Curious Tables of the Births and Funerals at the City of Breslaw; With an Attempt to Ascertain the Price of Annuities upon Lives; Edmund Halley (1693).
9. Insurance; The History of Insurance; Columbia Electronic Encyclopedia; 6th Ed;
10. Nicholas Barbon on a Discourse of Trade; Introduction; Nicholas Barbon; Edited by Jacob H. Hollander (1905).
11. Health Insurance Makes Financial Sense; Dawn Enstruthe (2009).
12. Aviva company history website;
13. Insurance Handbook; Insurance Information Institute (2010).
14. The Actuary: The Role and Limitations of the Profession Since the Mid-19th Century; Hans B├╝hlmann (1997).
15. The Friendly Society History; the Friendly Society Restored website;
16. Some sources suggest that either the Friendly Society, or another insurance company, was actually formed in Charleston, South Carolina, in 1732, History of Insurance; Wikipedia;
17. Company History; The Philadelphia Contributorship;
18. Stemple on Insurance Contracts; Jeffrey W. Stempel, Vol. 1, §2.07, 3rd Ed., 2007.
19. State Insurance Regulation: History, Purpose and Structure; National Association of Insurance Commissioners;
20. Insurance Regulation in the United States: Regulatory Federalism and the National Association of Insurance Commissioners; Susan Randall; Florida State University Law Review, Vol. 26:625, 1999;
21. The Case for Federal Regulation of Insurance; Tom Baker, Tobin Project, 2006,

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