HISTORY OF MARINE INSURANCE

HISTORY OF MARINE INSURANCE 

Contrary to popular belief, Lloyds' of London was not the first group of people to offer insurance for maritime commerce. The first form of marine insurance dates back to the year 3000 BC when Chinese merchants dispersed their shipments amongst several vessels so as to abridge the possibility of damage to the product(s). The earliest account of insurance came in the form of bottomry, a monetary payment that protects traders from debt if merchandise is lost or damaged. Another form of early insurance was the general average. During cargo shipments in 916 BC, a merchant would accompany his cargo to see that it was not jettisoned, or voluntarily thrown overboard by the crewmen in times of a storm or sinkage. To guard against this mutual interest of safety and quarreling amongst merchants, the Rhodians initiated the general average, which ideally meant that a person would be compensated through pro rata contributions of other merchants if their goods were jettisoned during shipment.

From the 11th century to 18th century, a few additional breakthroughs occurred in marine insurance. In 1132, the Danish began to reimburse those who experienced loss at sea. In 1255, insurance premiums were used for the first time as the Merchant State of Venice pooled these premiums to indemnify loss due to piratry, spoilage, or pillage. The first marine insurance policy was introduced in 1384 in an attempt to cover bales of fabric traveling to Savona from Pisa, Italy. Within the next century, merchants from Lombard began the first insurance practice in London. Finally, in 1688, Lloyd's of London, named after Edward Lloyd, began the risky business of insurance underwriting and have grown to become the largest marine insurance underwriters in the world. The Marine Insurance Act of 1906 was then proposed and initiated in an attempt to clarify and set forth the regualtions and policy variables associated with marine insurance agreements.