VI. The First Marine Insurance Companies
IT was a day pregnant with events affecting the whole course of European commercial and financial history, when, near the close of the seventeenth century, the son of an Edinborough goldsmith made his escape from the King’s Bench prison of London, where he was detained after having been tried for murder at the Old Bailey and condemned to death, and succeeded in gaining the coast and the shore of France. The name of the escaped prisoner was John Law, and in personal appearance he was described in the “Hue and Cry” that went after him, graphically, if not flatteringly, as being “a black lean man, about six feet high, large pock holes in his face, big high nose, and speech broad and loud.” The fugitive from justice, according to this description, was clearly not attractive outwardly, yet he attracted personages of the highest birth and rank, as scarcely ever was done by any man of his position. The convict from the Old Bailey, the “black lean man,” high-nosed and loud-voiced, became the intimate friend and counsellor of the Regent of France, controller-general of the public exchequer of the kingdom, and originator of the most gigantic financial imposture recorded in the world’s annals.
To peruse the details of contemporary sketches of the actions of nominally sane human beings during the prevalence of the Mississippi fever, stirred up by John Law in France, is like reading a romance, absolutely incredible, although vouched for by ever so many trustworthy eyewitnesses. The only explanation that seems possible of such doings as happened in France, when crowds kept turning in furious whirl around a group of needy speculators assembling in the Rue Quincampoix, Paris, is that not only individuals, but masses of people, and even whole nations, may suddenly turn mad. It appears undeniable that, if not during the whole of the years 1718 and 1719, when Law and his Mississippi Company ruled everything, at least during a portion of the time, while the fever of speculation was at its highest, reason had made abdication among the French, and madness reigned supreme. It was a disease that proved infectious, and leaving France it came to England. At the very time when the people of Paris slowly recovered their mental health, the people of London fell into lunacy. Closely in the wake of the gigantic Mississippi swindle followed the huge South Sea Bubble.
“I am tired of politics and lost in the South Sea,” wrote Prior in the summer of 1720; “the roaring of the waves and the madness of the people are justly put together; it is all wilder than St. Anthony’s dream.” The founder of monachism certainly did not and could not see in his visions, in one group, half the number of devils, monsters, satyrs, and centaurs that were seen in the English metropolis, congregated within a very small space, during part of the year 1720. For a time, a number of the greatest scoundrels in England, usually either shut up in prison or hiding in obscurity, reigned in a blaze of triumph, while dupes and rogues marched arm in arm, everybody speculating wildly, seriously believing to be able to acquire wealth in a day by passing bits of paper from hand to hand. It is calculated that during the time that the South Sea mania lasted there were more than two thousand schemes set afloat, mostly in the shape of joint-stock undertakings, the total representing a nominal capital of five hundred millions sterling, being, says a contemporary writer, “about five times as much as the current cash of all Europe.”
Among the schemes there were many so absurd, although calling for millions, as seemingly designed to cast ridicule upon the whole; still they found admirers all the same amidst the prevailing feverish excitement. “From morning till evening,” an eye-witness in Anderson’s “Origin of Commerce,” describes the scenes he saw in London,” the dealers in projects, as well as in South Sea stock, appeared in continual crowds all over Exchange Alley, so as to choak up the passage through it. Not a week passed without fresh projects, recommended by pompous advertisements in all the newspapers, which were now swelled enormously, directing where to subscribe to them. On some, sixpence per cent, was paid down; on others one shilling per cent.; and some came so low as one shilling per thousand at the time of subscribing. Some of the obscure keepers of those books of subscription, contenting themselves with what they had got in the forenoon, by the subscription of millions (one of which the author particularly well remembers) were not to be found in the afternoon of the same day, the room they had hired for a day being shut up, and they and their subscription books never heard of more. On others of those projects, two shillings and two shillings and sixpence per cent, was paid down; and on some ten shillings per cent, was deposited, being such as had some one or more persons of known credit to midwife them into the Alley. Some were divided into shares, instead of hundreds and thousands, upon each of which so much was paid down; and both for them and the other kinds there were printed receipts signed by persons utterly unknown. Persons of quality of both sexes were deeply engaged in many of these bubbles, avarice prevailing at this time over all considerations of either dignity or equity; the males coming to taverns and coffee-houses to meet their brokers, and the ladies to the shops of milliners and haberdashers for the same ends. Any. impudent impostor, whilst the delusion was at its greatest height, needed only to hire a room at some coffee-house, or other house near the Alley, for a few hours, and open a subscription book for something relative to commerce, manufactures, plantation, or some supposed invention, either newly hatched out of his own brain, or else stolen from some of the many abortive projects of others, having first advertised it in the newspapers the preceding day, and he might, in a few hours, find subscribers for one or two millions, or in some cases more, of imaginary stock.”
Among the legion of schemes of all kinds brought forward during the prevalence of the mania, about a hundred related to insurance. The comparatively small number shows how little the subject was yet understood or appreciated, which is further proved by the oddity of some of the insurance projects. At the Crown tavern, Smithfield, a “subscription-book” was opened, for establishing “An insurance-office for horses dying natural deaths, stolen, or disabled;” at the Fountain tavern there was started “A co-partnership for insuring and increasing Children’s fortunes at another place in the City subscribers came to put their names and money down for “Plummer and Petty’s Insurance from Death by drinking Geneva and, again, at another place in Exchange Alley, an enterprising person, William Helmes by name, set up a well-patronized “Assurance of Female Chastity.” Then there were started offices for “Assurance from lying for “Insurance from housebreakers for “Rum insurance for “Insurance from highwaymen,” and numerous others, one more absurd than the other, but all finding friends and admirers.
Of schemes devoted to marine insurance, partly or entirely, there were very few, and these the most practical of any of this class of projects, a fact easily explained through its being the only practically established form of insurance. It was not likely, either, that mere bubbles would find favour among either insurers of ships or underwriters of policies of insurance, and thus schemers in this direction found little scope for their work. The most notable projects that found their way among the public were five in number, three of which collapsed, while the last two got firm hold in the ground, and became great and flourishing institutions. The three projects, neither without merit, that perished, were a “Company for the Mutual Insurance of Ships,” started at Sadlers’ Hall; an “Office for Insurance from loss, by Garraway’s Fishery,” also known as “Crutchley’s Office,” for which subscriptions were opened at Jonathan’s coffee-house; and a “Company for insuring ships and merchandise,” with a capital of £2,000,000, started from the Marine coffee-house, a young rival establishment of Lloyd’s. The vital power wanting in these projects went over to the other two, shaping itself into the form of the two still existing great companies, flourishing veterans of marine insurance, the “London Assurance Corporation,” and the “Royal Exchange Assurance Corporation.”
The first idea of starting these two companies arose long before the South Sea Bubble. As far back as 1716, a Mr. Billingsley, partner in the firm of Messrs. Bradly and Billingsley, solicitors, of Mercers’ Hall, had launched a project called “the Public Assurance Office,” to be incorporated “with one or two millions of capital.” Mr. Billingsley succeeded in enlisting the support of a large number of London merchants and shipowners in his scheme, and on the 25th January, 1718, they presented a petition, signed by 286 names, to the government, praying for the grant of a charter of incorporation. The petitioners averred the necessity of establishing a “Company of Insurers with a joint stock of one million,” on the main ground of the insufficiency of private energy and capital to carry on the business of marine insurance; many underwriters, it was stated, had failed, involving numbers in ruin, and the only remedy for such a state of things would be to form a corporate body sufficiently rich to protect from loss “his Majesty’s good subjects and their families.”
The project naturally caused great alarm to the underwriters, both those transacting business at Lloyd’s and at private offices, and they immediately met, and got up a counter-petition to the government, which obtained 375 signatures, earnestly protesting against the establishment of a chartered marine insurance company. Such an institution, they declared, would not only create a monopoly, but lead to undue preference, and to delay and refusal in insuring ships at critical times, in stormy weather, and when ships might be missing. The underwriters of London, at the head of whose petition figured the name of Sir Gilbert Heathcote, were joined soon after in a similar petition by those of Bristol, who, repeating the arguments already put forward, declared their conviction that no company was required, the business of marine insurance being in a very satisfactory condition in England, and the premiums charged in London and Bristol lower than in any other parts of Europe.