Abstract

The widespread adoption of marine insurance by merchants in international trade was the result of a revolution in the pricing of marine insurance in the seventeenth century. In London, marine insurance prices dropped by more than half, and in some cases 75%. The city soon became the leading insurance centre in the world, as a progressive increase in the number of trade voyages allowed the transformation of ‘uncertainty’ into ‘risk’, which allowed more accurate risk-based pricing. This paper is in three parts. The first discusses the theoretical transformation of uncertainty into risk. The second explores the reasons behind the fall in marine insurance prices, and London’s resulting success in this important sector of the international transportation business. The final, quantitative section examines the fall in prices from the sixteenth century to the eighteenth, drawing on a new, unique database.