Perhaps the first cargo insurance program was the “general average” practice of the inhabitants of Rhodes in ancient Greece around three thousand years ago. Groups of merchants whose goods were being shipped together collected a pool of money that would be use to reimburse any merchant for losses during transport because of storms or sinking. The ancient Athenians’ so called “maritime loans” provided funds in advance for voyages with the interest rates calculated according to risk. Repayment was cancelled if the ship was lost.
True maritime insurance was invented in Genoa, Italy in the 14th century. Insurance pools were backed by pledges from landed estates. The insured paid premiums based on estimated risks. Between the 14th and 15th century maritime insurance was widely developed as were systems for estimating risk to calculate rates. The first book on maritime insurance entitled (in Italian) “On Insurance and Merchants’ Bets” was written in 1488 (four years before Columbus’ voyage), and published in 1552.
Formal dedicated insurance companies began appearing during the late 18th and early 19th century. Historical records mention formalized insurance in London as early as the early 17th century. The first insured events were in fact related to the safe arrival of a ship. London was becoming increasingly important as a maritime trade center during the 17th century.
When, in the 1680s, Edward Lloyd opened a coffee house popular among ship owners, captains, and merchants, the demand for ocean cargo insurance was high and so was the number of industrialists willing to underwrite such contracts. Lloyd’s of London, probably the first Cargo Insurance Broker, was established in the early eighteen hundreds.
Today, ocean cargo insurance has become an essential part of the shipping trade. The ocean cargo insurance market is well developed with many kinds of cargo insurance available along with many levels of coverage. International law plays an important role in regulating the industry. Although international conventions limit the liability of carriers in case of a wide variety of unfortunate events, cargo must be insured to recover full losses.
Cargo insurance is a fast changing aspect of the shipping business. Up to date information and advice is necessary in this complex marketplace.