Insuring Against Risk: Analysis of Insurance Policies and the Perception of Risk in Atlantic World Trade
Insuring Against Risk: Analysis of Insurance Policies and the Perception of Risk in Atlantic World Trade
Insurance was an essential element of long-distance merchants' strategies of risk management. Analyzing nearly eight hundred insurance policies dating from the years 1759 to 1818, Chapter 8 provides a microeconomic and statistical analysis of the perceptions of risk in Spanish oceanic commerce. Insurance policies provided coverage for vessels and commodities against shipwrecks, accidents, inclement weather, piracy, and warfare. Insurance directors devised myriad strategies to spread risk, reduce fraud, and mitigate the risky behavior of policyholders. The data reveals that directors were logical and consistent in their actuarial assessments of risk. During wartime partnerships charged very high premiums but were exposed to very high levels of risk. While the hefty costs of insurance during war dissuaded many traders from transacting, some paid exorbitant premium rates with the hope of profiting handsomely by reaching undersupplied markets.
Keywords: insurance, premium rates, actuarial science, moral hazard, coinsurance, risk pooling, corsairs, war
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