The history of insurance traces the evolution of the modern practice of protecting against risks — particularly in relation to cargo, property, death, motor accidents, and medical treatment.

The insurance industry serves to minimise risks (for example, when fire insurance providers require the implementation of safety measures and the installation of hydrants), distribute risks from individuals across the wider community, and provide an important source of long-term finance for both public and private sectors.

Table of Contents

History of Insurance

Ancient Era

In December 1901 and January 1902, under the direction of archaeologist Jacques de Morgan, Father Jean-Vincent Scheil, OP discovered a basalt or diorite stele — 2.25 metres (88.5 inches) tall — inscribed with 4,130 lines of cuneiform law dictated by Hammurabi (c. 1792–1750 BCE) of the First Babylonian Empire. The stele was unearthed in the ancient city of Susa (modern-day Shush, Iran).

Law 100 of the Code of Hammurabi required debtors to repay loans to creditors according to a fixed schedule, with a maturity date specified in written contractual terms. Laws 101 and 102 established that a shipping agent, factor, or ship charterer was obliged to repay only the principal of a loan if a net income loss or total loss occurred due to an Act of God. Law 103 further stipulated that such parties were exempt from repaying a loan entirely if they were victims of theft during the charter period, upon submitting a sworn statement confirming the theft.

Law 104 required carriers (agents, factors, or charterers) to issue a waybill and invoice for a carriage contract to consignees, detailing terms for sales, commissions, and laytime, and to receive a bill of parcel and lien authorising the consignment. Law 105 declared that claims for losses made without receipts were invalid, while Law 126 prescribed punishment for false claims.

Law 235 held shipbuilders liable for up to one year after construction for replacing an unseaworthy vessel lost during its charter. Laws 236 and 237 stated that captains, ship managers, or charterers were responsible for replacing a lost vessel and its cargo if negligence caused the loss. Law 238 provided that a captain or charterer who managed to save a ship from total destruction needed to pay only half the ship’s value to its owner. Law 240 declared that the owner of a cargo ship responsible for the destruction of a passenger ship in a collision must replace both the passenger ship and any cargo, upon submission of a sworn statement by the affected owner.

In 1816, excavations in Minya, Egypt (then part of the Ottoman Empire) uncovered a Nerva–Antonine dynasty tablet from the ruins of the Temple of Antinous in Antinoöpolis. The tablet prescribed the rules and membership dues of a burial society (collegium) founded in Lanuvium, Italy, around 133 CE during the reign of Emperor Hadrian (117–138 CE).

In 1851, future U.S. Supreme Court Justice Joseph P. Bradley (who once served as an actuary for the Mutual Benefit Life Insurance Company) published an article in the Journal of the Institute of Actuaries. The article detailed a Severan dynasty life table compiled by the Roman jurist Ulpian around 220 CE, during the reign of Elagabalus (218–222 CE). This life table was later included in the Digesta seu Pandectae (533 CE), part of Emperor Justinian I’s (527–565 CE) codification of Roman law.

The Digesta also included a legal opinion by the Roman jurist Paulus, written at the start of the Crisis of the Third Century (235 CE), referencing the Lex Rhodia (“Rhodian Law”). This articulated the principle of general average, a foundational concept of marine insurance established on the island of Rhodes between approximately 1000 and 800 BCE. The law provided that losses incurred for the common good — such as jettisoning cargo to save a ship — should be shared proportionally among all parties. This principle is widely regarded as the foundation upon which modern insurance is built.

Insurance, in one form or another, dates back to prehistoric times. Initially, people traded goods within their own communities. Over time, trade expanded to neighbouring villages. Two economic systems emerged: natural (non-monetary) economies, based on barter and mutual exchange, and monetary economies, involving markets, currency, and financial instruments.

In non-monetary systems, risk-sharing took the form of mutual aid agreements — early examples of co-operative behaviour. Communities developed institutions such as guilds and proto-states to provide collective protection and ensure survival in difficult circumstances. Compensation was often non-financial; for example, if one family’s home was destroyed, neighbours would help rebuild it. Similarly, public granaries represented an early form of insurance against famine.

In the 3rd and 2nd millennia BCE, Babylonian, Chinese, and Indian traders developed methods for risk distribution within monetary economies. Chinese merchants navigating dangerous river routes divided their goods among several vessels to minimise potential loss if a single boat capsized.

The Babylonians, as recorded in the Code of Hammurabi (c. 1750 BCE), practised a form of maritime insurance: a merchant who borrowed money to finance a shipment would pay an additional fee to guarantee that the loan would be cancelled if the cargo was lost or stolen. Similar ideas are found in Hindu scriptures such as the Dharmasastra, Arthashastra, and Manusmriti (3rd century BCE).

In Ancient Persia, Achaemenid monarchs received annual tributes from various subject peoples. These tributes acted as a form of political insurance, binding the monarch to protect those groups from harm.

The so-called Rhodian Sea Law also applied to seafarers and merchants. It decreed that if cargo had to be jettisoned to save a ship, the loss would be shared collectively by the crew and merchants involved. This early insurance law is often attributed to the Greek island of Rhodes around 1000 BCE, though the earliest references appear in late Roman legal texts.

In Ancient Athens, a form of “maritime loan” operated, whereby lenders advanced funds for voyages on the condition that repayment would be waived if the ship was lost. By the 4th century BCE, loan rates varied according to seasonal risk, demonstrating an intuitive grasp of risk-based pricing, similar to modern insurance principles.

During the Peloponnesian Wars, some Athenian slave owners volunteered their slaves to serve as oarsmen in warships. In return for a small annual premium paid to the state, the owner would receive compensation if the slave was killed in action — effectively an early form of life insurance.

The Greeks and Romans (c. 600 BCE) also founded benevolent societies, which provided for the families of deceased members and paid funeral expenses. These evolved into the guilds of the Middle Ages, which maintained similar practices. The Jewish Talmud also addresses matters relating to insuring goods.

Before modern insurance became formalised in the late 17th century, friendly societies in England served a similar role. Members contributed to a communal fund, which could then be used to assist individuals during emergencies — an early precursor to modern mutual insurance organisations.

Medieval Era

Before the development of traditional marine insurance, sea loans (foenus nauticum) were a common financial practice in medieval times. In this system, an investor would lend money to a travelling merchant, who would then be liable to repay the loan only if the ship returned safely. In this way, both credit and sea insurance were effectively provided at once. To compensate for the high level of risk, the merchant was required to pay a substantial rate of interest, far greater than that charged to overland traders, who simply shared profits instead of facing total loss.

However, this arrangement was later condemned by Pope Gregory IX as usury in his decretal Naviganti of 1236 (Decretales, V, XIX, 19). In response, commenda contracts were introduced. Under a commenda, investors supplied funds to an entrepreneur to conduct trade, assuming the risk of loss in exchange for a favourable share of the profits if the venture succeeded.

By the late 13th century, Italian merchants had begun to separate risk management from finance, using cambium contracts, which involved purchasing discounted bills of exchange from merchants who did not themselves travel by sea. To manage maritime risks, they developed the insurance loan, whereby a merchant would pay a premium to a shipowner in the form of an unenforceable loan, under an agreement that the shipowner would reimburse losses if the goods failed to reach their destination.

In 1293, King Denis of Portugal established a fund known as the Bolsa de Comércio through mutual agreement among Portuguese merchants. This institution, approved on 10 May 1293, is regarded as the first documented form of marine insurance in Europe.

During the 13th and early 14th centuries, European traders expanded their routes across the known world. To guard against theft or fraud by captains or crew — known collectively as Risicum Gentium (“the risk of peoples”) — they began to employ commission-based agents in distant markets. The earliest known Chamber of Assurance was founded in 1310 in the Flemish commercial city of Bruges, a major hub of European trade.

Traders exported their goods to these agents, who sold them on their behalf. Transporting goods by sea or land involved numerous risks — including storms, piracy, fire, and damage during loading or unloading. To mitigate these dangers, merchants adopted various risk-hedging measures. Instead of shipping all goods on a single vessel, they would divide consignments among multiple ships to reduce the potential for total loss. However, this method was inefficient and time-consuming, prompting the search for more effective mechanisms — giving rise to insurance as the earliest systematic form of risk transfer.

Marine insurance became an essential element of international trade, making large-scale commerce viable by offering protection against unpredictable losses. Among the principal financial instruments of medieval trade used to hedge risk were sea loans (mutuum), commenda contracts, and bills of exchange.

Historian Nelli (1972) observed that the commenda contract and sea loan were the closest precursors to modern marine insurance. Although it was long believed that the first formal marine insurance contract was issued in Genoa on 23 October 1347, Professor Federigo later discovered earlier documentation — dated 13 February 1343 in Pisa. Italian traders subsequently spread the practice and knowledge of insurance across Europe and the Mediterranean.

By the 15th century, the word policy had become the standard term for an insurance contract. By the 16th century, insurance was well established in Britain, France, and the Netherlands. The concept of insuring abroad — obtaining policies outside one’s native country — developed in the 17th century, prompted by reduced local trade or the high cost of domestic insurance.

According to Kingston (2011), Lloyd’s Coffee House in London became the pre-eminent marine insurance marketplace during the 18th century. Both European and American merchants used it to insure their shipping ventures. The rules and regulations governing insurance were largely derived from Italian merchant customs, known collectively as the “Law Merchant”, which formed the foundation of international marine insurance law.

When disputes arose, both policyholder and underwriter each appointed an arbitrator, and these two selected a third impartial arbitrator. The majority decision was binding. However, because these informal arbitration courts lacked enforcement power, traders increasingly turned to formal courts for resolution.

By the 14th and 15th centuries, many cities established specialised courts for marine insurance disputes. For example:

In Genoa, regulations were enacted in 1369 imposing fines on those who ignored Church prohibitions on usury related to sea loans and commenda contracts.
In Barcelona, an ordinance of 1435 required traders to take insurance disputes before formal courts.
In Venice, the “Consoli dei Mercanti”, a specialised mercantile court, was established in 1436.
In Genoa, the mercantile court was replaced in 1520 by the Rota, a more specialised institution that combined merchant custom with formal legal principles.

The first separate insurance contracts — distinct from loans or other financial arrangements — emerged in Genoa in the 14th century, alongside insurance pools backed by pledges of landed estates. The earliest surviving written insurance contract dates from 1347 in Genoa, and by the following century, maritime insurance had spread widely, with premiums intuitively adjusted according to risk.

This innovation marked the separation of insurance from investment, a distinction that proved especially valuable in maritime trade. The first printed book on insurance, a legal treatise titled On Insurance and Merchants’ Bets by Pedro de Santarém (Santerna), was written in 1488 and later published in 1552, establishing a scholarly foundation for the growing discipline of insurance law and practice.

Modern Insurance

Insurance became increasingly sophisticated in Enlightenment-era Europe, evolving into a range of specialised forms. Several types of insurance first appeared in London during the early 17th century.

For instance, the will of Robert Hayman, an English colonist, refers to two “policies of insurance” taken out with Arthur Duck, Chancellor of the Diocese of London. Each was valued at £100 — one covering the safe arrival of Hayman’s ship in Guyana, and the other insuring his own life. This represents one of the earliest documented references to both marine and life insurance in England.

Property Insurance

The Hamburger Feuerkasse (Hamburg Fire Office), established in 1676, became the first officially founded fire insurance company in the world, and remains the oldest public insurance enterprise still in operation.

Modern property insurance, however, can be traced to the Great Fire of London in 1666, which destroyed over 13,000 houses. The immense devastation transformed insurance from a matter of convenience into one of urgent necessity — a shift reflected in Sir Christopher Wren’s 1667 rebuilding plan for London, which included provision for an Insurance Office.

In 1681, the economist Nicholas Barbon, together with eleven associates, established the Insurance Office for Houses behind the Royal Exchange, to insure brick and frame dwellings. Initially, around 5,000 homes were covered under its policies — marking the birth of modern urban property insurance.

Following Barbon’s success, numerous fire insurance companies were founded in the ensuing decades. Each initially maintained its own fire brigade to protect properties insured by that company. Insured buildings were identified by fire insurance marks, which were metal emblems affixed above doorways to show the building’s insurer.

A notable example was the Hand in Hand Fire & Life Insurance Society, founded in 1696 at Tom’s Coffee House in St Martin’s Lane, London. Operated as a mutual society, it ran its own fire brigade for 135 years and played a crucial role in the development of firefighting and fire prevention in Britain. The Sun Fire Office, founded in 1710, remains the earliest surviving property insurance company.

However, the system soon revealed flaws: rival fire brigades often ignored burning buildings that were insured by other companies. Eventually, London’s insurers agreed to contribute to a municipal fire service, responsible for deploying fire engines and crews citywide — though brigades still tended to prioritise insured properties over uninsured ones.

In Colonial America, the first company to underwrite fire insurance was formed in Charles Town (modern-day Charleston, South Carolina) in 1732.

Benjamin Franklin later popularised and formalised the practice of insurance — particularly property insurance — to spread the risk of fire losses. In 1752, he founded the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire. Franklin’s company made significant contributions to fire prevention, refusing to insure excessively hazardous wooden buildings and actively promoting safety standards — principles that helped lay the foundations of modern American insurance.

Business Insurance

At roughly the same time, insurance schemes for commercial and maritime ventures began to flourish. By the end of the 17th century, London’s emergence as a major centre of international trade generated a strong demand for marine insurance.

In the late 1680s, Edward Lloyd opened a coffee house on Tower Street in London. During this period, the city was home to hundreds of coffee houses, many serving distinct professional or social groups. Lloyd’s establishment attracted shipowners, merchants, and sea captains, quickly becoming renowned as a reliable source of shipping intelligence — including news of shipwrecks, losses, and voyages.

This gathering place naturally evolved into a marketplace for maritime insurance, connecting those seeking to insure cargoes and ships with those willing to underwrite such risks. These informal dealings eventually developed into the world-famous Lloyd’s of London, as well as several related insurance businesses.

In 1774, long after Edward Lloyd’s death in 1713, participants in the insurance market formed a committee and relocated to the Royal Exchange on Cornhill, establishing the Society of Lloyd’s. From its inception, Lloyd’s has functioned not as a single insurance company, but as a marketplace for individuals — and later, groups — underwriting insurance policies independently.

In 1720, the Royal Exchange Assurance Corporation received its royal charter under the Royal Exchange and London Assurance Corporation Act (1719). This act granted the corporation exclusive rights to insure marine property within Great Britain, while still allowing unincorporated individuals, including members of Lloyd’s, to act as underwriters. Between 1741 and 1750, the corporation was headed by Nicholas Magens, a prominent merchant, lawyer, and author.

Over time, underwriters at Lloyd’s and other firms expanded from marine coverage into additional lines of insurance. Likewise, many fire insurers diversified to cover other causes of property damage, as well as business and personal liabilities, including injuries caused by defective goods or unsafe premises. These developments gave rise to the modern global market of property and liability insurance.

Life Insurance

The first life insurance policies were introduced in the early 18th century. The Amicable Society for a Perpetual Assurance Office, founded in London in 1706 by William Talbot and Sir Thomas Allen, was the first company to offer life insurance.

Members paid a fixed annual sum per share (from one to three shares), depending on age (between 12 and 55). At the end of each year, part of the collective fund — called the “amicable contribution” — was distributed to the wives and children of deceased members, proportionate to their shares. The society began with about 2,000 members and established the basic framework of life assurance as a mutual benefit system.

Although Edmund Halley compiled the first life table in 1693, it was not until the 1750s that mathematical and statistical tools were sufficiently advanced to support accurate life assurance calculations.

James Dodson, a mathematician and actuary, attempted to found a new company that would issue premiums precisely calibrated to life expectancy. Denied entry to the Amicable Society due to his age, he sought a royal charter for a new firm but died in 1757 before succeeding.

His pupil, Edward Rowe Mores, fulfilled his vision by establishing the Society for Equitable Assurances on Lives and Survivorships in 1762 — the world’s first mutual life insurer. The Equitable pioneered age-based premiums calculated according to mortality rates, thereby laying the scientific foundation of modern life assurance.

Mores also introduced the title of “actuary” for the company’s chief official — the first recorded use of the term in a business context. The Society’s first modern actuary, William Morgan, served from 1775 to 1830 and implemented revolutionary innovations:

the first actuarial valuation of liabilities (1776);
the first reversionary bonus (1781);
the first interim bonus (1809);
and the use of regular valuations to balance members’ interests.

The Society for Equitable Assurances became a model of ethical and scientific insurance practice, treating members fairly and ensuring equitable returns. Premiums were adjusted according to age, and policies were available regardless of health or personal circumstances — principles that underpin modern life assurance to this day.

In America, the sale of life insurance began in the 1760s. The Presbyterian Synods of Philadelphia and New York founded the Corporation for the Relief of Poor and Distressed Widows and Children of Presbyterian Ministers in 1759, followed by an Episcopalian relief fund in 1769. Between 1787 and 1837, more than two dozen life insurance companies were founded in the United States — though fewer than half survived — paving the way for the later rise of America’s life assurance industry.

Accident Insurance

By the late 19th century, a new form of protection known as accident insurance emerged, functioning in much the same way as modern disability insurance. This innovation reflected growing public concern over the dangers of industrialisation and rapid technological progress, particularly in transport.

The first company to offer accident insurance was the Railway Passengers Assurance Company, founded in England in 1848, at a time when the expanding railway system was witnessing a sharp increase in passenger injuries and fatalities.

The company was originally registered as the Universal Casualty Compensation Company, with the purpose of:

“…granting assurances on the lives of persons travelling by railway, and granting, in cases where an accident does not result fatally, compensation to the assured for injuries received under certain conditions.”

To make the service accessible, the company entered into an agreement with various railway companies, allowing basic accident insurance to be sold as part of a package with travel tickets. This pioneering model effectively introduced the concept of travel insurance.

Premiums were tiered according to travel class — with second- and third-class passengers paying higher rates, owing to the greater risks of injury associated with their open, roofless carriages.

This early system of accident insurance marked a significant step towards personal risk protection in the modern age, bridging the gap between traditional life insurance and the later development of health and occupational safety insurance.