Controlling Volatility

Why insurers exist and what that means for the future evolution of the industry

The first recorded instance of insurance took place in China in the third millennium B.C. Merchants traveling treacherous river rapids would redistribute their wares across many vessels to limit the loss should any of the vessels capsize.

This arrangement allowed the merchants to achieve widely expected outcomes, which were certainly more predictable than 100 percent of goods or zero percent of goods.

The earliest identifiable case of insurance conducted as a separate business was also marine insurance. By 1574, there were 30 sworn brokers in London who produced policies underwritten by London merchants. Although this developing insurance market in London was subject to competition in the 17th century from shipping centers such Amsterdam, Edward Lloyd’s coffee house became recognized as the place for obtaining marine insurance, and this is where the Lloyd’s of London that we know today began.

Controlling Volatility