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Insurance, defined as an equitable transfer of risk from one entity to another in exchange for a monetary payment to protect against loss was practiced by both the Chinese and Babylonians. This will be referred to as formal insurance. Insurance in this form provides a formal and legally mediated form of risk management and protects the insured against catastrophic loss based onpon forseable and relatively manageble contingent negative events.

This form of formal protection against contingent loss was implmented in the 3rd and 2nd millennia B.C.

The Chinese distributed loads across several vessels while the Babylonian merchants paid lenders a premium to insure against having to repay the debt should the cargo upon which to loan was collateralized was lost.

 The Greeks and Romans introduced early forms of life insurance underwritten by guilds which were called 'benevolent societies'. The guilds cared for the families and funerals of deceased members. The Guilds in England during the Middle Ages also provided similar benefits. England also developed friendly societies in the 17th century. Money was collected to be used for emergencies.

Genoa is said to have invented the insurance business, defined as a company that provided insurance to cover specified risk upon payment of a premium in the 14th centurym they also created the idea of insurance pools backed by pledges of land.

In the late 1680s, Edward Lloyd opened a coffee house that became a popular haunt of ship owners, merchants, and ships' captains, and thereby a reliable source of the latest shipping news. It became the meeting place for parties wishing to insure cargoes and ships, and those willing to underwrite such ventures. Today, Lloyd's of London remains the leading market (note that it is an insurance market rather than a company) for marine and other specialist types of insurance, but it operates rather differently than the more familiar kinds of insurance. Insurance as we know it today can be traced to the Great Fire of London, which in 1666 devoured more than 13,000 houses. The devastating effects of the fire converted the development of insurance "from a matter of convenience into one of urgency, a change of opinion reflected in Sir Christopher Wren's inclusion of a site for 'the Insurance Office' in his new plan for London in 1667."[17] A number of attempted fire insurance schemes came to nothing, but in 1681 Nicholas Barbon, and eleven associates, established England's first fire insurance company, the 'Insurance Office for Houses', at the back of the Royal Exchange. Initially, 5,000 homes were insured by Barbon's Insurance Office.[18]   Wikipedia

In the United States Benjamin Franklin was the first insurer to make contributions towards fire prevention and refuse to insure certain buildings where the risk of fire was to grear as for example all wooden homes.

 

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