The earliest (known) London insurance
London was a subscription market for insurance a long time before Ed Lloyd opened the coffee shop.
In 1426, more than 270 years before Edward Lloyd opened his coffee-house in the shadow of the Tower, a London-based Italian merchant named Alexander Ferrantyn bought a £250 insurance policy to cover his ship, the Saint Anne of London (John Starling, master), and the cargo of Bordeaux wine he was importing to London. The policy was subscribed in Lombard Street, home of London’s north Italian merchant community, by seventeen other resident merchants (originally from Venice, Genoa, and Florence), and backed by their personal wealth. They had each signed their name at the bottom of the policy wording, making them ‘under-writers’ (or ‘sub-scribers’).
Lombard merchants were underwriting in the 1400s.
Ferrantyn made a claim. Both the vessel and its cargo were seized by Spaniards and sold by the privateers to Flemish merchants. Ferrantyn, through an agent, managed to repurchase the vessel and its cargo, and went to his insurers to indemnify the cost. They politely refused to pay. At the time most marine insurance disputes were settled by arbitration, but the case was so unusual that no one knew the correct course of action. In 1427, everyone ended up in the Alderman’s Court at the Guildhall.
The policy specified that the ‘order, manner, and custom of the Florentines’ was to govern the contract. The claimant requested indemnity ‘by the law merchant and according to the manner, order and custom of the Florentines’. Ferrantyn argued that Florentine custom required the indemnity to be paid despite the recovery of the insured vessel and goods, but the insurers insisted that it did not. Both parties promised to produce notarised testimony from the Italian city which would state the prevailing local custom in such situations. So confident were the defending insurers that they paid the disputed £250, plus £100 as surety, into the court. That was an enormous sum then!
Sorry for the anti-climax: the outcome of the case is lost to the ravages of time. However, this historic incident shows how insurance was underwritten in England a very long time ago, that such insurances followed formats and practices very similar to those employed today, and that the courts were a last resort. The mechanics of London’s insurance market have been fine-tuned over the interceding six centuries, but the fundamentals remain the same. We all tend to say London’s insurance market began 325 years ago, thereabouts, with the foundation of Lloyd’s Coffee-house, but that short-changes the reality by a very long time!