Lloyd's of London, the famous insurance market, began in a coffee house
Toward the end of the 1680s, Edward Lloyd started serving coffee in London, and his premises became the place where shipowners and merchants met people willing to cover their cargoes and vessels. Those informal gatherings over coffee grew into Lloyd's of London, still one of the best-known names in insurance, famous for covering the lives of celebrities.
Spreading risk is far older than the word insurance. Chinese merchants shooting dangerous river rapids thousands of years ago split their goods across many boats, so one capsizing would not ruin them. The Code of Hammurabi, from around 1750 BC, set rules for sharing losses at sea, and the Rhodian law described by Roman jurists established general average, the principle that everyone with goods aboard shares the cost when some cargo is sacrificed to save the ship. Ancient Greeks used marine loans that were cancelled if the ship sank, with steep interest to cover that gamble.
Stand-alone policies emerged in Genoa, where the oldest known insurance contract dates from 1347. The first recorded life policy was written at London's Royal Exchange on 18 June 1583, covering a man named William Gibbons for twelve months. Disaster then accelerated the business. The Great Fire of London in 1666 destroyed more than 13,000 houses, and Christopher Wren's rebuilding plan even reserved a site for an insurance office. In 1681 the economist Nicholas Barbon and eleven partners founded the first fire insurer, soon covering 5,000 homes.
Life cover became more scientific in 1762, when Edward Rowe Mores founded the Society for Equitable Assurances, the first mutual insurer and a pioneer of premiums based on age and mortality. Railways brought the first accident insurer in 1848. Governments followed: Otto von Bismarck introduced pensions, accident insurance and medical cover in Germany in the 1880s, and Britain's National Insurance Act of 1911 created a contributory scheme against illness and unemployment.
The underlying logic has not changed. Many people pay a small, certain premium into a shared pool so that the few who suffer a large, uncertain loss can be compensated. For that to work, losses must be definite and accidental; gambles like lottery tickets or ordinary business risks usually cannot be insured.
Source: Insurance
