Financial History Issue 124 (Winter 2018) | Page 30

FROM TIME OUT OF MIND A Brief History of Marine Insurance 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 By Gregory DL Morris Financial history has most often been taken to be the history of money, bank- ing and lending, and stock markets. Fair enough, but insurance deserves equal bill- ing. It is a widely-held belief by insur- ance professionals and researchers that marine insurance — hull and cargo spe- cifically — are the oldest forms of insur- ance. Some date early forms of those to Phoenician traders whose heyday of trad- ing 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 voy- ages 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 insur- ance has been driven by the concurrent need to transfer and diffuse those concen- trated 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 pol- icy that we would recognize today as such was from 1350,” said Rod Johnson, direc- tor of marine risk management at RSA Global Risk, a major UK underwriter. He also sits on the loss-prevention commit- tee of the International Union of Marine Insurers. “Marine insurance is based on agreed levels of uncertainty,” Johnson explained. 28    FINANCIAL HISTORY  |  Winter 2018  | www.MoAF.org “The owner of the vessel and the shippers of the cargo know where the vessel is sup- posed 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 mari- time 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 Costa Concordia, owned by the world’s largest cruise line, Carnival, hit rocks close to the island of Giglio off Tuscany in January 2012, killing 32 people. The captain, who fled the sinking ship, was convicted of manslaughter. The salvage — righting, removing and scrapping the ship; as well as paying damages and environmental restoration — cost $2 billion and took more than two years.