Caravans and Ships
Insurance: Proscribed
Early Mutual Societies
From London to Québec


Caravans and Ships

For centuries, mankind has resorted to insurance to protect property. In fact, the earliest references to insurance appear around 2000 BC, in the form of written contracts outlining procedures for sharing losses incurred during transport, particularly by caravan or by ship. This was a time, of course, when pirates, bandits and looters were a fact of life, both on land and at sea!

Thus, the Babylonian Code of Hammurabi stipulated that if merchandise were stolen or lost, the designated transporter would be relieved of his responsibility for delivery, as long as he could prove he was not an accomplice to the crime. The loss was then shared by the merchants who participated in the caravan.


The "bottomry loan", the precursor of shipping and transport insurance, appeared at the beginning of the first millennium. Merchants lent funds to the transporter, who repaid them only once he returned to port safe and sound, without having sustained damage or fallen victim to pirates.

Insurance actually came into being early in the second millennium, more precisely in 1063, when Italian and English merchants found a way to protect themselves against losses incurred as a result of shipwrecks or seizure of their ships by pirates. The merchants formed an association, creating a fund to which they made regular contributions and from which they drew compensation. This was known as the Amalfi Sea Code.

Italy, Portugal and France all take credit for inventing marine insurance. In fact, each of these countries holds archives dating from the 13^th and 14^th centuries that deal with maritime law and stipulate terms of insurance.

Insurance: Proscribed

In the 14^th century, the "verbal agreement" was the rule in commerce. Written agreements, when used, were simply a means of establishing proof, and then only when the document was drawn up by a notary. A decree published in Genoa in 1369 refers to "unofficial insurance" or "secret insurance."

In 1468, Venice became the first state to adopt a law on insurance, to establish procedures for dealing essentially with fraud. At the end of the 1500s, Venetian authorities attempted to tax insurance policies. Notaries were opposed to it, stating that insurers and insured parties would reach private agreements in order to avoid the tax and would treat all business as "secret insurance."

Until the 16^th century, the Church's ban on usury delayed the development of insurance as we know it today. In Rome's view, insurance was equivalent to a wager. Betting and insurance were equally considered to be wagers on an event. This stance, however, would change with time, allowing insurance to evolve according to need.

Early Mutual Societies

Early 17^th century Germany gave rise to the first mutual societies. As their name suggests, these were societies collectively held by the policyholders. In many cities, an expert appointed by the sovereign would estimate the value of property and list it in a register. Every property owner who belonged to the society had to pay a sum proportional to the value of his property. These sums were pooled to create a fund that was used to indemnify those whose houses suffered damage.

By the 17^th century, marine insurance was already well structured: terms were established and codified, and true insurance companies began to appear. These companies saw the need to band together for the general benefit of their new profession.


Paris, in 1657, had its 'Offices de notaires – Greffiers des assurances'. These 'insurance chambers' served as a sort of club where insurers, brokers and clients could meet and exchange information.

From London all the way to Québec

At about the same time, other European countries witnessed the appearance of a form of fire insurance, which experienced stunning growth after the Great Fire of London of 1666, when four fifths of the city were destroyed.

This was the era of the prestigious Lloyd's of London company which, ironically, saw the light of day in Edward Lloyd's tavern – a place frequented by ship owners, seafarers and merchants. Initially, the establishment was an insurance "exchange", later becoming the ship and cargo insurance centre.

It was also during this time of dynamic international commerce that public companies practising true insurance, such as the General Fire Office, were formed in Germany. Risks were categorised, and annual premiums were charged in proportion to the maximum amount of insurance coverage.

Closer to home, the 1700s saw the establishment of America's first insurance companies. In 1752, Benjamin Franklin – celebrated physician, man of politics and inventor of the lightning rod – founded a mutual insurance company.

The first British insurance company to open its doors in Canada was the Phoenix Insurance Co. Ltd, in 1804. Five years later, the first Canadian company, the fire Association of Halifax (which later became the Halifax Insurance Co.), was founded. In Québec, the first truly homegrown company was The Québec Fire Insurance Company, founded in 1819. Then, beginning in 1833, a number of Québec mutual societies specializing in fire insurance opened for business in Montréal and in the Eastern Townships.

Several members of IBC are the descendants of these venerable institutions.