The first insurance company was established in the city of Genoa, Italy in the late 14th century. It provided coverage for ship captains and merchants in case their cargo was lost at sea.
Technically, it was the first modern insurance company, since insurance goes back to roughly 2000 BC.
What do we know about the first insurance company?
The city of Genoa, Italy was a center of commerce and trade in the 15th century. That’s partly because it was a natural stop for merchants and ship captains traveling across the Mediterranean to trade goods.
With so much trade and commerce taking place, loss was inevitable – especially at sea. it was only natural that a system of risk management would develop to protect merchants and ship captains from financial loss. In fact, these types of contracts had existed for over 1000 years, but had previously been tied to loans.
While we don’t know much about the group that constituted the first insurance company Genoa in the late 14th century, it appears to have been created as a mutual aid society. In other words, members paid premiums and shared the cost of losses in case their cargo was lost at sea.
By the mid-15th century, insurance was a well-established industry in Genoa, and the city became known as a hub of insurance and risk management.
However, the insurance industry did face challenges at the start. For example, the city and its docks were at constant risk from attacks by pirates and other thieves. As a result, insurance companies had to find ways to provide coverage in the midst of many unpredictable dangers.
Of course, the insurance industry became incredibly lucrative. So much so that the government subjected it to hefty taxes.
Much of what we know about the details of Genoa’s early insurance days comes from two contracts. They were signed by seafarers in 1343 and 1347. These were the first insurance contracts not to be tied to marine loans. This made them unique by tying them to a company that solely dealt in risk management. In other words, the first insurance company.
The first insurance contracts
But insurance itself doesn’t begin in Genoa.
Insurance contracts have a long history, dating back to ancient civilizations. Over 2000 years ago, people would pool their resources to protect against financial loss. The loss could have been caused by unforeseen events such as fire, theft, or death. While it’s unlike the modern contracts offered by insurance companies today, this concept of mutual protection and risk sharing is considered to be the earliest form of insurance.
We know this took place in ancient Babylon because we still have fragments of the stones the contracts were chiseled into. They indicate that merchants would pool resources to protect against losses from shipping and trade. If a merchant’s goods were lost or damaged during transit, the other members of the pool would share the cost of the loss.
Merchants in the Roman Empire also used mutual aid insurance to protect against the loss of cargo and ships during sea voyages. Merchants would form associations to share the risk of loss.
While this may seem benevolent in terms of modern life, a person who engaged in mutual aid could rest easier knowing that it was unlikely that one event would cost them everything.
These early forms of insurance were informal. Many times, there were no formal contracts or regulations, and the terms and conditions of the insurance arrangements were often defined by custom and tradition.