The History of Insurance Part 2

Readers will be aware that in The History of Insurance (Part 1), I discussed the Babylonian Code of Hammurabi – written around 1750 BC – which contains rules concerning an early form of bottomry.

This is where a ship is used as security against a loan to finance a voyage, the lender losing their money if the ship sinks. The loan with interest is payable if the ship completes the voyage.

The Babylonians merchants moved their goods using traders who formed caravans travelling primarily by land, and over the next thousand years the contract of ‘bottomry’ was introduced and developed by Hindu traders in India and, arguably more importantly, the Phoenicians.

Phoenicia was an ancient civilisation composed of independent city-states which lay along the coast of the Mediterranean Sea, stretching through what is now Syria, Lebanon and northern Israel.

Phoenician city-states began to emerge around 3200 BC but it was between 1500 BC and 300 BC that they developed into the greatest traders of the time, trading with the Babylonians, the Greeks, and later the Romans.

They traded items such as wood, slaves, glass and Tyrian purple (a violet-purple dye originating from the city of Tyre, used by the wealthy Greeks to colour garments).

The word Phoenician itself derives from the Greek word phoinikes for Tyrian purple.

The Phoenicians invented the original alphabet which consisted of 22 letters. The Greeks later adopted it and added 4 more, all of which we use today. The Phoenicians also used numbers which look like what we would call Roman Numerals today.

At some stage, the Phoenicians settled on the island of Rhodes. After the Trojan war (around 1180 BC), Rhodes began rapid progress, developing into a strong, independent seafaring and trading island, becoming the home of one of the Seven Wonders of the Ancient World – the Colossus of Rhodes.

The people of Rhodes developed rules of law to deal with shipping disputes, including a code of maritime law known as “Lex Rhodia”, believed to have been written around 900 – 800 BC

Whilst no copy of “Lex Rhodia” has ever been found, it is mentioned in later Roman writings and this is where we pick up the story of insurance – or at least the sharing of losses.

For example, it is explicitly mentioned in a book of Roman law text, “Opinions of Julius Paulus” (235 AD):

“It is provided by the Lex Rhodia that if merchandise is thrown overboard for the purpose of lightening a ship, the loss is made good by the assessment of all which is made for the benefit of all.

“If after a ship has been lightened by throwing the merchandise overboard, it should be lost, and the merchandise of others should be recovered by divers, it has been settled that he who threw his property overboard for the purpose of saving the ship will be entitled to an account of the same.

“Where either the ship – or a mast – is lost in a storm, the passengers are not liable to contribution, unless the vessel was saved through the passengers themselves cutting down the mast to insure their own preservation.

“Where, for the purpose of lightening a ship, merchandise is thrown into a boat and lost, it is established that the loss shall be made good by the assessment of the property which remained safe in the ship. If, however, the ship should be lost, no account should be taken of the boat which was saved, or of the merchandise it may have contained.

“Contribution by assessment should be made where property has been thrown into the sea, and the ship has been saved.”

A further Roman book “The Digests of Justinian” makes reference to “Concerning the Rhodian Law of Jettison” and similarly quotes:

“It is provided by the Rhodian Law that where merchandise is thrown overboard for the purpose of lightening a ship, what has been lost for the benefit of all must be made up by the contribution of all.”

Again, history deals with what we now know as General Average – and a standard clause within marine insurance policies.

This takes us nicely onto the Romans and in the next in this series looking at the history of insurance, I explore Roman burial societies.