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 or lost at sea.
England in the mid 18th century Merchants and shipowners very largely insured their own ventures themselves, but the need for discounting facilities arose after 1750 with the growing volume of bills drawn against West Indian merchants.
The rate of interest for sea loans was high to compensate for the high risks involved.
The history of insurance traces the development of the modern business of insurance against risks, especially regarding cargo, property, death, automobile accidents, and medical treatment.
The insurance industry helps to eliminate risks (as when fire-insurance providers demand the implementation of safe practices and the installation of hydrants), spreads risks from individuals to the larger community, and provides an important source of long-term finance for both the public and private sectors.
In the thirteenth and early fourteenth centuries, the European traders traveled to sell their goods across the globe and to hedge the risk of theft or fraud by the Captain or crew also known as Risicum Gentium.
However, they realized that selling this way, involves not only the risk of loss (i.e.
The first methods of transferring or distributing risk in a monetary economy were practiced by Chinese and Babylonian traders in the 3rd and 2nd millennia BC, respectively.