A brief history of Insurance:
Part Two: Rhodian General Average and Athenan Maritime Loans:
OK, so in the first article in this series we discovered that whilst those amazing Chinese chaps were out inventing everything and anything, they put together the worlds first ever risk management systems. We also discovered that it was a thousand years or so later that a rather brilliant Babylonian, a first dynasty king called Hammurabi came up with something that many scholars consider to be the first recorded form of monetised insurance.
This system was in fact set to become incredibly wide spread largely down to the Babylonian’s sphere of influence within the young, growing markets of commerce within early history. The practice of paying what we would now consider an insurance premium, to cover the cost of a merchant’s cargo should it be lossed due to theft or accident on the high seas, had become common place across the mediteranean in its many fledgling cultures.
As the cultures of the meditaranean developed and in particular that of Ancient Greece, so we see further complexities within insurance as a financial product within these cultures and also their growing importance within the daily lives of members of these societies.
The inhabitants of Rhodes were to establish a rule of general average amongst their merchants and traders. In essence this was very much in the same vein as a general mutual insurance fund, a term many of us are more familiar with. This general average was created to allow groups of merchants to pay to insure their goods which were to be shipped together. Under this very community minded statute, should a merchant be unfortunate enough to have his goods jettisoned due to reasons of sinkage or storm, then each of the merchants whose cargo was also on the journey would share the cost of this loss by paying a premium. Of course the term and principals of general average are still applicable in many modern marine insurance policies today.
It was during this period in history that the concepts of insurance and risk management really began to beccome more refined and complexities within risk calculations started to emerge. And it all started with boat insurance.
The ancient Athenians created what was termed a maritime loan. This loan provided advanced money for voyages and repayment was cancelled if the ship was lost at sea, much like the laws in the older Codes of Hammurabi and indeed the maritime loans of modern times. It was circa the fourth century that the rates of interest for loans differed accordingly to the relative ease or danger of the passage. The time of the year, the prevalent weather conditions, the route to be taken, even the socio politcal enviroment were all taken into account, which would suggest a level of intuitve pricing for risk begining to very much resemble modern day insurance.
As with so many elements of modern society, we see that what began in Mesoptamia, was once again absorbed and developed by the Greeks, and as is true with many other facets to civilisation, was so then absorbed and further explored within the Graeco-Roman and then Roman cultures. Insurance was to be no different and as other lines of insurance developed in our modern era out of marine insurance so it was to be the case in the ancient empires of Greece and Rome.
In the next installement we shall explore this further as we discover how the Greeks and Romans introduced the concepts of Health Insurance and Life insurance to their civilisations.