MARINE INSURANCE 1. Place and importance.—The contract of insur ance is widely used in the modern business world. Under its terms one party, the insured, pays to a sec ond party, the insurer, a sum of money in consid eration of which the insurer agrees to indemnify the insured for any loss that may arise from some con tingency stated in the contract. The contract is the policy, the sum paid as consideration, the premium.
The risks which are covered by insurance are at the present time of the most varied character, and the policies written may assume many forms. The chief divisions of insurance are : Marine Fire Life Casualty Each has its peCuliar characteristics which will en gage our attention. Marine insurance is the oldest form of insurance known. It is therefore natural that it should have had considerable influence in shap ing the development of other forms of insurance.
These facts entitle it to the first place in any consid eration of insurance as a whole.
2. Beginning of marine the form of bottomry, marine insurance was practised among nations. A loan on bottomry was a fatorite form of investment among the ancients. It united an investment with a risk, and because of the element of risk involved in a sea voyage a higher rate of return was allowed on this form of bond, even in countries where there were laws against usury. A bottomry bond is nothing more or less than a loan body of the vessel. Its equivalent in real estate is a mortgage on the property.
In something like its modern form marine insurance is said to have flourished in the Hanseatic League and among the commercial cities on the Mediterranean Sea. It appears to have been introduced into Eng land by the Lombards, but with the growth of ship ping passed later into English hands.
The name most distinctly associated with marine in surance in its earliest days is that of Edward Lloyd. His coffee house in London became the meeting place for business men who specialized in marine matters. At this coffee house sales of vessels were conducted regularly and the business of insurance was carried on.
So strong had the insurance business become that it continued after Lloyd's death, and resulted in the formation of the famous institution now known as Lloyd's of London.
In the year 1720 two companies were chartered by the government of England for the purpose of con ducting the business of marine insurance. In consid eration of certain payments made for the charters, the right to transact such business was denied to other companies. These companies are still in existence, altho they have of course long since lost any Monopo listic privileges which they originally had, and must compete, with other companies. When the question of granting charters to these companies was under con sideration the members of Lloyd's opposed it vigor ously, feeling that it would jeopardize the business in which they were engaged. No such result followed. The two companies that were chartered had permis sion in their charter to do business in other forms of insurance, and they engaged largely in other branches of insurance. In fact, they did only a small part of the marine insurance business. The bulk of it re mained, as heretofore, in the hands of the members of Lloyd's, and in the century that elapsed before the abolition of monopoly privileges and the subsequent establishment of other companies to do a marine busi ness in England, Lloyd's built up its great institution. which has remained unassailable down to the present time.
3. Marine insurance in the United States.—In the middle of the eighteenth century the Insurance Ex change was established in New York City. It was an institution similar to Lloyd's, when underwriting was carried on by individuals. By the year 1825, however, this form of underwriting had practically disappeared. In the meantime companies had been formed that rapidly assumed control of the business which remains today in the hands of corporations.