Babylonian and Chinese traders practised early methods of transferring or distributing risk as long ago as the 2 nd and 3 rd millennia
BC. Chinese merchants, who travelled treacherous river rapids, would redistribute their wares over a few vessels so as to limit the loss of
any one of the vessels capsised. According to the famous Code of Hammurabi, c, 1750 BC, the Babylonians developed a system which was
practised by early Mediterranean sailing merchants. If a merchant received a loan to fund his shipment, he would pay the lender an
additional sum in exchange for the lender's guarantee to cancel the loan should the shipment be stolen.
The inhabitants of Rhodes invented the concept of the 'general average' a thousand years later. Merchants whose goods were being shipped
together would pay a proportionally divided premium which would be used to reimburse any merchant whose goods were jettisoned during storm
or if the vessel would sink.
The Romans and Greeks introduced the origins of life and health insurance, c. 600 AD, when guilds called 'benevolent societies' were
organised. These 'benevolent societies' acted to care for the families and funeral expenses of members when someone died. Guilds in the
Middle Ages served a similar purpose. The Talmud deals with several aspects of insuring goods. Before insurance was established in the late
17th century, ";friendly societies"; existed in England, in which people donated amounts of money to a general sum that could be
used in case of emergency.
Insurance as we know it today can be traced to the Great Fire of London, which in 1666 devoured 13,200 houses. In the aftermath of this
disaster Nicholas Barbon opened an office to insure buildings. In 1680 he established England's first fire insurance company, "The Fire Office"; to insure brick and frame homes.
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