Risk tradition and risk trading Risk mitigation based on solidarity MANCHESTER UNITY was widespread among guilds trade associations, and village communities 000000 Today the link between risk, new ventures organisations provided ex-post, and thus and growth seems self-evident. And yet morally acceptable, forms of solidarity. his understanding is surprisingly recent reading risk in such a way had its limits bove: In antiquity. risk was often seen through however, and as a business model it faced riendly or benevolent societies, also called the lens of fate and met with acceptance many difficulties. Ship owners sailing fraternal organisations have a long tradition rather than defiance. Protecting again the same route would often experience ceived as t insurance, often for people with a similar to interfering with divine providence communities such as mine-workers working background. With the advent of For millennia, prayers, pilgrimages an a single disaster could far exceed the modern insurance and the welfare state donations outperformed insurance capacities of a burial club. many of these mutual organisations went Indeed. as late as the 19th out of business entury, insuring against death was likely Also, early forms of mutual insurance, Preceding pages lacked the sophistication of modern A flood at Erichem, the Netherlands, in 1809. But there were acceptable ways of enterprises Operating costs had to be alleviating losses, such as sharing risks financed out of members' contributions vithin social and business communities. and hardly any such societies had ways Members of fire societies were obliged to help Risk mitigation based on solidarity was to invest the capital professionally For each other to secure goods from burni houses of fellow members the societies had widespread among guilds, trade modern insurance, spreading risk and their own fire-fighting equipment. Some associations, and village communities. managing finances was to become vital. of them gradually started collecting mone Most seafaring nations distributed for those affected by a fire and eventually cargo onto different ships to hedge One more element however, was to be turned into mutual fire insurance companies. against storms and pirates while fraternal at least as influential During the Middle Ages, many countries allowed begging for those who had lost their house and goods after a fire. The fire of berne Switzerland in 1405 killed over 100 people and destroyed more than 600 houses 少 Pve Swiss Re A History of InsuranceSwiss Re A History of Insurance 7 Risk tradition and risk trading Today the link between risk, new ventures and growth seems self-evident. And yet this understanding is surprisingly recent. In antiquity, risk was often seen through the lens of fate and met with acceptance rather than defiance. Protecting against misfortunes was perceived as tantamount to interfering with divine providence. For millennia, prayers, pilgrimages and donations outperformed insurance premiums. Indeed, as late as the 19th century, insuring against death was likely to arouse controversy among clerics. But there were acceptable ways of alleviating losses, such as sharing risks within social and business communities. Risk mitigation based on solidarity was widespread among guilds, trade associations, and village communities. Most seafaring nations distributed cargo onto different ships to hedge against storms and pirates while fraternal organisations provided ex-post, and thus morally acceptable, forms of solidarity. Spreading risk in such a way had its limits, however, and as a business model it faced many difficulties. Ship owners sailing the same route would often experience accumulated losses, as would certain communities, such as mine-workers. A single disaster could far exceed the capacities of a burial club. Also, early forms of mutual insurance, whereby premiums were paid ex ante, lacked the sophistication of modern enterprises. Operating costs had to be financed out of members’ contributions and hardly any such societies had ways to invest the capital professionally. For modern insurance, spreading risk and managing finances was to become vital. One more element, however, was to be at least as influential. Above: Friendly or benevolent societies, also called fraternal organisations, have a long tradition in many European countries. Before modern insurance such organisations would provide insurance, often for people with a similar working background. With the advent of modern insurance and the welfare state many of these mutual organisations went out of business. Preceding pages: A flood at Erichem, the Netherlands, in 1809. Right: Members of fire societies were obliged to help each other to secure goods from burning houses of fellow members. The societies had their own fire-fighting equipment. Some of them gradually started collecting money for those affected by a fire and eventually turned into mutual fire insurance companies. Opposite: During the Middle Ages, many countries allowed begging for those who had lost their house and goods after a fire. The fire of Berne, Switzerland, in 1405 killed over 100 people and destroyed more than 600 houses. Risk mitigation based on solidarity was widespread among guilds, trade associations, and village communities