Marine Insurance in Philadelphia During
the Quasi-War with France, 1795–1801
CHRISTOPHER KINGSTON
Until the 1790s marine insurance in the United States was organized by brokers
and underwritten by private individuals. Beginning in 1792, however, the private
underwriters had to compete with newly formed marine insurance corporations.
Each organizational form had advantages and disadvantages. This article
uses archival data from a private underwriter and a corporation to study how
the competition between these different organizational forms was affected by a
powerful exogenous shock which substantially increased the risks to American
merchant shipping in the late 1790s: the “Quasi-War” between the United States
and France.
A
round 20 June 1797 the Philadelphian merchant George Latimer
visited the insurance brokerage of Isaac Wharton and David Lewis
to insure goods he was shipping to Hispaniola (Haiti) on the snow
Boston. A policy was drawn up specifying the details of the risk and
the premium rate was tentatively agreed at 15 percent, reflecting the
danger of capture by French privateers then active in the Caribbean. The
brokers then offered the policy to their underwriters.
A few days later, William and Samuel Keith insured twelve hogsheads
of claret that they were shipping on the same vessel for $480, likewise
paying a premium of 15 percent.1 However, instead of going to a broker,
the Keiths obtained their insurance from the Insurance Company of North
America (INA), a joint stock marine insurance corporation.
At this time, France and Britain were at war. Therefore, as was usual,
the insured in all cases warranted that the vessel carried the documents
required to establish that the goods were American (neutral) property
under U.S. law. Nevertheless, the Boston was captured on 25 July by
the French privateer Fine, and carried into Jean-Rabel, where she was
The Journal of Economic History, Vol. 71, No. 1 (March 2011). © The Economic History
Association. All rights reserved. doi:10.1017/S0022050711000064.
Christopher Kingston is Associate Professor, Department of Economics, Amherst College,
314 Converse Hall, Amherst, MA 01002. E-mail: [email protected].
I thank ACE Group and the ACE Group corporate archivist, Joan Lowe, for access to the INA
archive; and Price Fishback, Gillian Hadfield, Daniel Klerman, Walter Nicholson, Robert
Wright, two anonymous referees, and seminar participants at Union College, Wesleyan
University, the Insurance and Society Group, BHC, ISNIE, the NBER Summer Institute,
Georgia State University, George Mason University, and the Center in Law, Economics, and
Organization at USC for helpful comments and discussions. Anoop Menon provided excellent
research assistance.
1
NARA, Collector of Customs at Philadelphia, Outward foreign entries, E1059B, Box 1689,
13 June 1797; and INA Marine Blotter, ACE Group Archives.
162
Marine Insurance in Philadelphia
163
condemned by a prize court for intending to trade with the English.2
This was unfortunate, but not unusual. During the late 1790s hundreds
of American merchant vessels suffered similar fates.3
Brokerages for individual underwriting had been operating in
Philadelphia since the 1740s, but the first American marine insurance
corporation had been formed only in 1792. Then in the late 1790s,
during the pivotal period when private underwriters and newly formed
corporations existed side by side, Philadelphia’s marine insurance
industry was buffeted by a massive exogenous shock, the “Quasi-War”
between America and France. This article uses archival data from a
private underwriter and a marine insurance corporation to study how the
Quasi-War affected the institutional structure of Philadelphia’s marine
insurance industry.
THE FORMATION OF AMERICAN MARINE INSURANCE
CORPORATIONS
While the basic contractual form of marine insurance policies was
quite standardized by the eighteenth century, the exact details of particular
policies varied considerably. Goods and vessels were usually insured in
separate policies. Some policies covered simple one-way trips, but others
covered more complicated voyages to multiple ports. The insured risks
varied from “sea risk” dangers of wind and weather to broader coverage
including the possibility of enemy capture. Policies sometimes allowed
some flexibility as to route and cargo, including specified adjustments
to the premium in various contingencies. It was also common for the
parties to add idiosyncratic clauses and conditions to the policy reflecting
the nature of the proposed voyage and the information available at the
time of contracting.
Before 1792 transactions were generally organized by brokers
who gathered “names” for each policy. By limiting their exposure on
any single risk and spreading their underwriting judiciously across a
variety of voyages, the private underwriters—many of them merchants
themselves—attempted to make a profit while minimizing the likelihood
of heavy losses. Although this system enabled merchants to share risk, it
had some drawbacks. In addition to the transactions costs of finding a new
set of underwriters for each policy, the security of the policy depended on
the financial security of the individual underwriters.
2
ACE Group Archives, INA ledger labelled, “French Captures”; and Bonnel, Guerre de
Course, p. 325.
3
On 2 November 1797 the INA paid a total loss. Presumably, the private underwriters did
also.
164
Kingston
A natural way to try to overcome some of these difficulties was to
form insurance partnerships or other associations. Britain’s Bubble Act
of 1720 had made the formation of marine insurance partnerships or
corporations illegal in the American colonies, but independence freed
Americans from this constraint. The first American joint stock marine
insurance corporation, the Insurance Company of North America (INA)
was formed in Philadelphia in 1792, and obtained a charter from the
state legislature in 1794. Many more marine insurance corporations
were formed in Philadelphia and other U.S. cities over the following
decade, part of a set of institutional innovations that Richard Sylla has
called the “U.S. Financial Revolution.”4
What were the advantages of corporations compared to the existing
system of private underwriting? The most frequently cited advantage
associated with the corporate form is the limitation of stockholders’
liability to the value of their stock. Limited liability facilitates
the delegation of control of capital by large numbers of investors to
those with the specialist managerial skills needed to employ the
capital productively.5 In particular, a key advantage of limited liability
corporations in comparison with joint liability partnerships is the
protection they afford to shareholders with “deep pockets” in case
the firm should become insolvent. This is crucial if shares are to be
freely transferable. Without limited liability, both creditors and other
shareholders would need to monitor each shareholder’s solvency in order
to protect their own position, and in particular, they would want to ensure
that shares were not transferred to asset-poor individuals.6
However, joint liability partnerships had never been observed in
British or American marine insurance. Instead, the most salient
organizational alternative was private individual underwriting, either
through stable syndicates or more usually through ad hoc syndicates
organized by brokers on a policy-by-policy basis. In either case, there
was no joint liability. Each private underwriter was liable only for the
amount he had underwritten or for his share of the syndicate, so the
“deep pockets” problem did not arise.
Furthermore, while some of the early American marine insurance
corporations obtained charters with clear limited liability provisions,
others did not, and many of the charters were more ambiguous or
avoided the question. The charter granted to the INA in April 1794 was
silent on the question of limited liability, but its founders were keen to
4
Sylla, “Political Economy.”
For example, see Easterbrook and Fischel, “Limited Liability.”
6
Woodward, “Limited Liability.” See, however, Acheson, Hickson, and Turner, “Does
Limited Liability Matter?” for evidence against this argument.
5
Marine Insurance in Philadelphia
165
limit their liability if possible, and they attempted to do so by changing
the wording of the policy. 7 Subsequent charters in Pennsylvania and
New York were similarly silent on the question. In December 1803,
the Articles of Association of the Phoenix Insurance Co. made clear
the founders’ intention that “the members of this association shall not
be liable to any loss, damage, or responsibility, in their persons, or
property, other than the property which they have respectively invested
in the capital and funds of the company.”8 Although the charter they
obtained two months later adopted most of the provisions of their
Articles of Association verbatim, the section on limited liability was
conspicuously omitted.9 It was not until 1810 that Pennsylvania granted
a charter with a clear statement of limited liability.10
Massachusetts, Connecticut, Rhode Island, and Washington DC
all chartered marine insurance corporations with limited liability.11 In
7
Insurance Company of North America charter: Early American Imprints (EAI), 2nd series,
no. 1112. The standard form of policy used by private underwriters included the clause, “And so
we the Assurers are contented and do hereby promise and bind ourselves, each one for his own
part, our Heirs Executors and Goods, to the Assured. . . .” A similar clause appears in privately
underwritten policies from Britain and America throughout the eighteenth century (see, e.g.,
HSP collection 1552, box 6/8). At first, the INA also used this form, but in May 1794, shortly
after incorporation, it changed the wording to “And so we the Assurers are contented, and do
hereby bind the Capital Stock, and other common Property of the President and Directors of the
Insurance Company of North America to the Assured.” This might be read as an attempt to
highlight the security of the policy; but more likely, its intent was to explicitly restrict any
claims to the “common property” of the corporation as opposed to the private property of the
shareholders (Montgomery, History, pp. 17, 49–50).
8
Articles of Association: EAI, 2nd series, no. 4867; charter (6 Feb 1804): EAI, 2nd series, no.
50464.
9
Again, it is hard to be sure whether this was because limited liability was rejected or taken
as a given. In any case, the Phoenix adopted a policy wording similar to that of the INA, as did
the Union, which was also chartered in 1803. See Phoenix policies in HSP MS 1552 box
8b; Constitution of the Union Insurance Company, July 1803 (EAI, 2nd series, no. 5192); and an
1804 policy reproduced in Fowler, History, p. 70. See also the Philadelphia Insurance Company
Articles of Association (1803), which specified limited liability (EAI, 2nd series, no. 4863);
and its 1804 charter, which was silent on the issue (EAI, 2nd series, no. 29468). Like the
Philadelphia corporations, both the New York Insurance Company and the United Insurance
Company (also chartered in 1798 in New York) placed clauses in their policies stating that only
the joint stock property of the company would be liable to pay losses. The New York Insurance
Company’s Articles of Association (1796) included a clear limited liability provision; but its Act
of Incorporation (1798) omitted these sections and instead stipulated that if the corporation were
dissolved, its members would be responsible for its debts “in their individual and private capacity
to the extent of their respective shares, and no further” (Articles of Association: EAI, 1st series, no.
30884; charter: EAI, 1st series, no. 34226). See also Goebel, Law Practice, pp. 405–06.
10
The charter of the United States Insurance Company specified that losses would be paid
“out of the joint funds of the company exclusively.” Charter: EAI, 2nd series, no. 21871.
11
See charters of the New Haven (1797), Hartford (1803), Middletown (1803), Norwich
(1803), and Union (1805) in Connecticut, Statute Laws; for the Connecticut corporations,
however, note that only a fraction (from 10 to 40 percent) of the nominal value of the capital
stock was actually to be paid in; the rest was secured by promissory notes from the shareholders,
making them in effect liable for further payments on demand up to the nominal value of their
166
Kingston
contrast, Maryland explicitly rejected limited liability. The charter of
the Maryland Insurance Company, passed on 24 Dec 1795, stipulated:
That if at any time the funds of the corporation should not be competent to pay
and satisfy the just demands of the assured, that nothing herein contained shall
be construed to discharge the stockholders from being liable for their respective
proportions of said losses, according to the number of shares they may hold
therein, but no stockholder shall be liable for more than his own proportion of
losses as aforesaid, or to answer for the failure or deficiency of others.12
Since the security of the policy therefore depended upon the solvency
of the members, the charter also stipulated that any transfers of shares
had to be approved by the directors. An unincorporated association
formed in Baltimore in 1799 and two further corporations chartered
in January 1805 adopted similar rules. 13 The Maryland corporations
were therefore essentially similar to large stable syndicates of private
underwriters. The difference was mainly in their size, the ease with
which shares could be transferred, and the raising of a capital fund as an
initial bulwark against losses.
In summary, while it appears that the corporations’ founders were
in general keen to limit their liability if possible, it seems unlikely
that limited liability was their primary objective. In all cases, either by
the charters, or by clauses inserted in the policies, wealthy shareholders
were insulated from joint liability in the event that other shareholders
proved insolvent. But this cannot be viewed as the key motive for
incorporation, since there had been no joint liability under the existing
system of private underwriting either. This accords with Edwin Perkins’
view that from a de jure standpoint, “the historical evidence regarding
whether stockholders in the late eighteenth and early nineteenth century
had limited or unlimited personal liability for a firm’s potential losses is
inconclusive.” However, they probably enjoyed de facto limited liability,
shares. For Rhode Island: see charters of the Newport (1799), Providence (1799), Warren (1800),
Washington (1800), and Hope (1804), EAI, 1st series, nos. 35970, 36182, 38980, 38344; 2nd
series, no. 6494. While the 22 marine insurance corporations chartered in Massachusetts between
1797 and 1805 appeared to limit shareholders’ liability (the phrasing varied and was in some cases
somewhat ambiguous), they also made the president and directors jointly and severally liable
for all losses incurred on policies underwritten after they knew of losses in excess of the capital
stock. See charters (1799–1804) in Massachusetts, Private and Special Statutes, vols. 2 and 3. See
also Dodd, American Business, p. 225. In Washington DC, the U.S. Senate granted the Columbia
General Insurance Company a limited liability charter in February 1803 (EAI, 2nd series, no.
5201).
12
Laws of Maryland, Session Laws, 1795 (Maryland State Archives online, vol. 647, p. 54).
13
”Whereas it is contemplated to establish an office or society for insurance, in the city of
Baltimore, under the name and stile of the Marine Insurance Office,” EAI, 1st series, no. 35147;
Charters of the Marine Insurance Co. and the Union Insurance Co., Laws of Maryland, Session
Laws, 1804 (Maryland State Archives online, vol. 562, pp. 24–26, 49–51).
Marine Insurance in Philadelphia
167
which later became formalized as the American common law developed
in the early nineteenth century. Given this ambiguity, he argues that in
the early republic “we may safely conclude that the prospect of limited
liability does not appear to have been among the inducements attracting
investors to place their funds in the shares of commercial banks and
other corporate ventures.”14
If not limited liability, what were the advantages of the corporate form?
In support of their petition for a charter, the INA’s founders argued
that whereas individual underwriters frequently failed, a corporation
would improve the security of the policy by holding a capital fund large
enough to cover all but a catastrophic run of bad luck.15 The security of
the policy was of paramount concern for merchants, so this gave the
corporations an important advantage on the demand side. In addition, if a
loss occurred, the insured would find it easier to recover from a
corporation than from many private underwriters individually.
Equally important, however, the corporations had an advantage
in the supply of insurance services because of their sheer scale. As
Eugene Fama and Michael Jensen note, stock companies enable risk to
be spread across many residual claimants who individually choose
the extent to which they bear risk and who can diversify their
holdings.16 Thus, the INA’s founders argued that a corporation could
draw on a larger stock of capital than could be accessed through
the existing system of private underwriters, whereas under the
existing system, “for want of a sufficient number of underwriters of
responsibility” large sums of money were “drained from the country”
as many American merchants continued to obtain insurance abroad,
principally in London. From this perspective, the key advantage of the
corporate form was to facilitate the organization of enormous yet
flexible underwriting syndicates, which vastly reduced the transactions
costs of spreading risk among a large number of people and obviated
the need to find a new group of underwriters for each policy. In
particular, the corporate form expanded the pool of available capital for
underwriting by enabling wealthy individuals who were not merchants
or were not physically located in Philadelphia to act as underwriters by
14
Perkins, American Public Finance, pp. 117, 373. Similarly, Edwin Dodd was unaware of
“any substantial evidence on the question whether, at the turn of the century, informed opinion
in Massachusetts did or did not regard incorporation as implying limitation of liability,” and
argued that limited liability only became clear through court cases in 1808/09 (Dodd, American
Business, pp. 370, 372). See also Handlin and Handlin, Origins; and Forbes, “Limited
Liability.”
15
INA petition to the Pennsylvania legislature, 18 December 1792, reprinted in Montgomery,
History, pp. 36–37.
16
Fama and Jensen, “Agency Problems.”
168
Kingston
entrusting their underwriting decisions to experts.17 At the same time it
gave these investors the flexibility to withdraw their capital by selling
their shares.18
Opponents of the petition argued that these advantages could equally
be provided by an unincorporated company, and the founders of the
INA indicated that they were willing to proceed without a corporate
charter if necessary. 19 Nevertheless, they vigorously sought a charter in
the face of considerable opposition. Competition among states probably
eased their path. When their initial petition for a charter ran into
opposition, they briefly threatened to seek a charter in Delaware.20
Given their important advantages in financial security and riskspreading, it may appear that corporations were simply a superior
organizational form to the preexisting institutions of private underwriting.
But the story is not so simple. In Britain, Lloyd’s of London had
developed into a sophisticated marine insurance marketplace based on
private underwriting, and successive waves of entry by corporations in
the nineteenth century failed to dislodge Lloyd’s from its dominant
position or to drive Britain’s private underwriters out of business.21 So,
what disadvantages, if any, did the corporations have relative to private
underwriting?
The key disadvantage of the corporate form identified by Fama and
Jensen is that agency problems, arising from the separation between
control by decision makers within the firm and the owners who bear
the residual risk, create a need for costly internal governance structures.
Even with such mechanisms in place, the agency problems are
unlikely to be completely overcome. 22 Timothy Guinnane, Ron
Harris, Naomi Lamoreaux, and Jean-Laurent Rosenthal argue that such
agency problems make the corporate form inferior to other organizational
forms for many kinds of business activity. 23 For example, Eric Hilt
17
Along similar lines, Harris, “Formation,” argues that the corporate form enabled informed
insiders to commit not to abuse the rights of less-informed outsiders and thereby attract
investment in the East India Company during the seventeenth century. Hilt, “Incentives in
Corporations,” p. 204, argues that corporations’ formal governance structure helped to induce
small investors with no knowledge of whaling to invest in whaling voyages in the 1830s.
18
This would explain why corporations rather than partnerships were introduced.
19
See “Thoughts on Insurance Corporations, &c.” by “An Enemy to Unnecessary
Corporations,” United States and Evening Advertiser, 1 Jan 1794, reproduced in Fowler, History,
pp. 48–49.
20
Montgomery, History, pp. 38–40.
21
Kingston, “Marine Insurance in Britain and America.”
22
Fama and Jensen, “Separation of Ownership and Control” and “Agency Problems.”
23
Guinnane et al., “Putting the Corporation in Its Place.”
Marine Insurance in Philadelphia
169
has shown that because of internal agency problems, corporations
performed significantly worse than unincorporated partnerships at
managing complex whaling voyages in the 1830s.24
The private underwriters, in contrast, faced no such internal agency
problems because they underwrote on their own account. The riskbearers and decision makers were the same people. This also gave them
another important advantage, the leeway to be flexible. Because of
the inherent uncertainties of eighteenth century trade, it was common,
and often unavoidable, for vessels to deviate from their planned
voyages and thereby technically void the policy. As a result, marine
insurance contracts were necessarily incomplete and it was important
for merchants to be able to trust the underwriter to act in good faith. In
1806 a broker informed a correspondent that:
The insurance on the Orestes, as you desired, was wholly effected by
incorporated Companies, and you need never consider an apology necessary for
giving them the preference when you wish it done. . .(but) I can assure you, in
regard to solvency, there are not perhaps two [private underwriters] who write
that I would hesitate in laying an India risk of my own before: And many
persons in this City are giving a preference to Individual Underwriters, from
experience that they may meet with a greater spirit of accommodation from
them, in case of Loss, than they can always expect from the Directors of an
Office, who must consult the Interest of the Stockholders, and may not conceive
it consistent with their Duty to be liberal.25
The private underwriters may also have had an advantage in
overcoming agency problems between the underwriter and the insured.
While the system of private underwriting was based on direct, hard-nosed
market transactions, it also relied on repeated interaction, reputation,
and trust among merchants who were deeply knowledgeable about
their business, and who dealt with each other in long-lived, multifaceted
business, social and religious relationships. Thus, underwriting on each
other’s voyages became part of the complex web of trusting personal
interactions that characterized the eighteenth century business world.26
24
Hilt, “Incentives in Corporations.”
Robert Hobart to Benjamin Mumford, 23 January 1806, Campbell-Mumford papers, NYHS.
26
Although the system of private underwriting as practiced by brokers, such as Wharton
& Lewis, was quite different from mutual insurance (a consumer cooperative), there are some
intriguing parallels. The mutual form, when feasible, has the advantage of not requiring a large
initial outlay of capital. Zanjani, “Regulation,” found that in the early-twentieth-century United
States, entrepreneurs in the life insurance industry tended to opt for the mutual form when statelevel regulations regarding initial capital requirements were sufficiently permissive to make it
feasible to do so. As discussed by Hansmann, “Organization of Insurance Companies,” mutuals
frequently also do better in overcoming moral hazard and adverse selection problems between
the firm and the insured.
25
170
Kingston
Finally, as Oliver Westall notes, the optimal choice of organizational
structure in insurance depends in part on the ability to transmit and
process information about risks. 27 In the course of their business as
merchants involved in trade, the private underwriters constantly gathered
information about the goods, vessels, captains, and routes on which they
underwrote and the people with whom they dealt. Embedded within their
business and social networks, they were well placed to obtain and process
the information necessary to evaluate risks and to overcome moral hazard
and adverse selection problems.28
THE QUASI-WAR WITH FRANCE
In the eighteenth century, it was common during wartime for
belligerent nations to commission private vessels to prey on enemy
commerce. Privateering provided a free, straightforward, and incentivecompatible way for the state to increase its naval strength and harass
the enemy. It should not be confused with piracy. At least in theory,
privateers were subject to strict rules governing the treatment of both
enemy and neutral vessels. If the captured vessels or goods were legally
condemned in prize courts, they became property of the captor. If,
on the other hand, the privateers were unable to show that the vessel
or goods were legitimate captures (“good prize”), they were released,
sometimes with payment of compensation. In practice, however, nations
differed over the conditions governing the neutrality of vessels and
cargoes, and inevitably, because a lot of money was at stake, the system
was sometimes abused.
The corporations founded in the United States in the 1790s came
into being at a turbulent time. Britain and France were at war. Although
the United States remained officially neutral (until 1812), it almost
went to war on several occasions. In 1794 the British captured hundreds
of American vessels trading with French colonies in the West Indies,
and war for a time seemed imminent, but it was averted by the
signing of Jay’s Treaty in November of that year. The treaty put an
end to British captures, but to obtain peace the Americans made
several concessions that were unfavorable to France. France retaliated
by issuing a series of increasingly restrictive decrees governing the
neutrality of American vessels. During the next few years, hundreds of
27
Westall, “Invisible, Visible, and ‘Direct’ Hands.”
Because of the small scale of the market, and because many of those involved in
corporations were merchants, the Philadelphian corporations’ disadvantage was likely much less
severe than the lemons problem that Kingston, “Marine Insurance in Britain and America,”
argues inhibited the growth of British marine insurance corporations.
28
Marine Insurance in Philadelphia
171
American merchantmen were captured by French privateers for alleged
violations of these decrees.29 By 1798 the situation in the West Indies
was described by a Frenchman as, “A system of piracy almost general,
sustained by a commercial tribunal which condemns without reserve
and without exception neutral and allied ships on the most frivolous
pretexts.”30
The United States government responded to these attacks by building
a navy that began to patrol sea routes and capture French privateers.
However, the United States did not declare war on France. Its navy
was authorized to attack vessels that posed a threat to American
shipping, but not to attack unarmed French merchant vessels or to attack
the French on land. Because war constantly threatened to erupt during
this period, but was never officially declared or fully engaged, the
conflict “placed the Adams administration and the American people in
a state of almost perpetual crisis.” 31 It is therefore referred to as a
“Quasi-War.” Following Napoleon Bonaparte’s coup d’état in 1799,
it became clear that the new French government wanted peace, and
the Quasi-War was brought to an end by a peace agreement (the
Mortefontaine Convention) signed in September 1800.
EFFECTS OF THE QUASI-WAR
War created both problems and opportunities for merchants and
underwriters. For merchants, the interruption of regular channels of
commerce could make wartime trade highly profitable. Yet, rapidly
changing political and military circumstances and the slow speed of
communication meant that unskillful or unlucky merchants could easily
find themselves facing ruin. For underwriters, high premium rates
meant that wartime underwriting could be highly profitable if carried
out judiciously, but it could prove disastrous if an unexpected political
or military development caused a string of losses.
The Quasi-War caused substantial fluctuations in insurance rates as
rumors of war and reports of privateering activity waxed and waned. The
secretary of one of the corporations remarked in 1797, “Circumstances
varying as they do, We are obliged to vary premiums very often.” 32
There was some trepidation about French intentions as early as October
of 1795, when the INA board sent a deputation to the Secretary of State
29
On the Quasi-War generally, see DeConde, Quasi-War; Allen, Our Naval War; Clauder,
“American Commerce”; and Phillips and Reede, Neutrality.
30
Quoted by Palmer, “Quasi-War,” p. 78.
31
DeConde, Quasi-War, p. 328.
32
HSP MS 2001 (Insurance Company of the State of Pennsylvania letterbook), 11 Mar 1797.
172
Kingston
to “inform him that a Report prevails that the French cruisers have orders
to Capture all vessels bound to British ports and request him to apply to
the French minister to know whether this is so or not.”33 French captures
began early in 1796. By late 1796 American newspapers carried lists of
captured vessels and the usual rate of premium on a one-way voyage
to the West Indies was 5 to 6 percent, already well above the usual
peacetime rate of 2½ to 3 percent. By early 1797 it had risen to 10 to 15
percent, and 25 percent and more was paid in 1798, when New York
merchant David Gelston lamented:
It is said England has issued orders to take all Neutral Vessels bound to any
French, Dutch, or Spanish ports either in Europe or America—the French
declare against all English ports the United States against all French ports—
where is a Vessel to be sent?34
By 1799 the successful actions of the U.S. Navy had begun to bring
premiums down, and they declined further in 1800/01 as the number
of French privateers diminished and the two countries moved toward
peace.
This article uses two manuscript sources to study the Quasi-War’s
effects on premium rates and the institutional structure of the marine
insurance industry. The first is a record of 1,068 policies insured by
a private underwriter through Wharton & Lewis’s brokerage, easily
the most established insurance brokerage in Philadelphia at the time,
between April 1795 and March 1801. 35 The amounts recorded do
not reflect the total sums insured on these vessels, and some voyages
that were insured through Wharton & Lewis’s office do not appear
in this record, so the record appears to reflect the underwriting of a
single substantial underwriter or possibly some kind of syndicate. 36
Therefore, the Wharton & Lewis register of policies is an incomplete,
but substantial record of the most important locus of private
underwriting activity in Philadelphia during this period. In what follows,
it is also assumed to be a representative record, both in terms of the
premiums charged and the overall number of policies underwritten.37
33
Montgomery, History, p. 53.
David Gelston to S. Tinker, 29 June 1798. Gelston letterbook, NYHS.
35
“Account of Policies Underwrote at Wharton & Lewis’s Insce Office,” HSP MS AMB
95591.
36
In December 1795, for example, the prominent Philadelphia merchant Stephen Girard
insured $10,000 through Wharton & Lewis on the ship Voltaire from Philadelphia to Hamburg
and back (Gillingham, Marine Insurance, p. 100). However, the entry in the Wharton and Lewis
record records a sum insured of only $800.
37
In the vast majority of cases, all the private underwriters who subscribed a policy were
paid the same premium, so the Quasi-War’s effect on the premiums charged by this underwriter
should be reflective of its effect on other underwriters also. The assumption that the volume
34
Marine Insurance in Philadelphia
173
FIGURE 1
NUMBER OF POLICIES UNDERWRITTEN EACH MONTH BY THE PRIVATE
UNDERWRITER THROUGH WHARTON AND LEWIS (RIGHT SCALE) AND BY THE
INSURANCE COMPANY OF NORTH AMERICA (LEFT SCALE),
APRIL 1795–MARCH 1801
Sources: HSP MS AMB 95591; INA Marine Blotters; and (for 1798/9) Journals, ACE INA
Archives.
These data are compared with records of policies insured during the
same period by the Insurance Company of North America (INA), one of
the two corporations active in the market.38 Note that one INA blotter,
covering the period from April 1798–March 1799, is missing, so there
is a gap in the INA data covering this period.
Figure 1 shows how the volume of business done by the private
underwriter and the corporation was affected by the Quasi-War. Of
course, there were perhaps 50 private underwriters and two corporations
active in the market, so it is not possible to gauge market share precisely.
However, the Quasi-War clearly coincided with a striking shift of the
marine insurance business out of the hands of private underwriters and
of business transacted by this underwriter reflects changes in the overall quantity of private
underwriting is more problematic, but seems necessary given the lack of records of other private
underwriters.
38
INA Marine Blotters, ACE Group Archive, Philadelphia. The other insurance company
active in Philadelphia was the Insurance Company of the State of Pennsylvania, which was also
chartered in 1794.
174
Kingston
into those of the corporations beginning in 1796, at around the time that
French captures began, and lasting until the threat receded around 1800.
The private underwriter insured a total of 286 voyages in 1796, which
collapsed to only 69 in 1798 before recovering somewhat to 186 in 1800
as the danger diminished. The number of vessels entering Philadelphia
from foreign ports, which may be taken as a rough barometer of the size
of the market, also fell somewhat during the war, from 817 in 1796 to
487 in 1798, and 565 in 1800.39 The number of policies insured by the
INA, however, actually increased from 1148 in 1796 to 1547 in 1798,
and was 1459 in 1800.40
EXPLAINING THE QUASI-WAR’S EFFECTS
It seems clear that the corporations were far more successful than
private underwriters in taking advantage of the tremendous opportunities
presented by the Quasi-War. Why?
First, the security of a privately underwritten policy was always a
concern for merchants. Even in peacetime, those seeking insurance
spared no effort to find “good men” to cover their risks, and those who
insured on behalf of correspondents in other ports constantly reassured
them that the names on their policies were “safe.” However, in wartime it
became even more difficult than usual to form reliable judgments about
the solvency of other merchants, because of the increased danger of
losses from both trade and underwriting. The Quasi-War, like earlier wars,
coincided with numerous failures. In April 1797 it was reported that:
The underwriters that are substantial will not take a risk to the West Indies and
back under 33½ to 40 percent against all risks. I say substantial because many
of our underwriters’ circumstances are such [that they are experiencing financial
difficulties].41
In May 1799 the Oliver brothers, merchants in Baltimore, warned that
“[t]he Times are so critical that there is but little security in any foreign
expedition and we don’t feel anxious to engage in them.” Others were
less cautious however, leading to numerous bankruptcies in Baltimore in
39
The goods on a single vessel, and the vessel itself, might be covered by several policies; and
Philadelphia’s underwriters insured both inbound and outbound voyages both to Philadelphia and
other American ports, and occasionally, “cross risks” between two foreign ports. Also, see Dun,
“‘What Avenues’.”
40
The private underwriter’s total premium income fell slightly from $14,642 in 1796 to
$13,251 in 1797 (the higher premiums almost compensating for the falling volume of business),
before collapsing to $7,007 in 1798. In contrast, the INA’s total premium income rose from
$467,122 in 1796 to $1,225,790 in 1797 and $1,304,219 in 1798.
41
David Spears, quoted by Ruwell, Eighteenth-Century Capitalism, p. 89.
Marine Insurance in Philadelphia
175
1799–1800, and the Olivers believed that “Philad[elphia] will soon be in
the same situation.”42 Thus, one merchant advised a correspondent that
although the private underwriters might be slightly cheaper, he should
insure with a corporation because “It being of a long duration before the
Voyage is completed, Deaths and other accidents may (and does too
often) happen to Individuals.”43
In contrast, as their founders had anticipated, the corporations were
widely perceived as financially secure. The INA’s capital, unlike that of a
private underwriter, was dedicated solely to the payment of insurance
losses, and was large enough to cover all but a catastrophic run of bad
luck.44 Moreover, its charter stipulated that its funds were to be invested
in relatively safe investments such as government debt and the stocks of
public corporations, such as banks, canal and turnpike companies, as well
as a small amount of real estate sufficient to house the company’s offices.
It was specifically forbidden to trade in goods or to engage in banking.
Accordingly, as the financial security of private underwriters became
more suspect, merchants seeking reliable insurance naturally gravitated to
the corporations. In September 1799, for example, Daniel Coxe insured
$8,000 worth of goods with the INA, noting in the policy that a portion of
the goods insured, “having been underwrote in New York by Bankrupts,
is to be considered as not having been underwrote there.”45
The upshot is that, while the war naturally drove up the actuarially fair
rates of premium on all voyages, it also caused an additional relative
increase in demand for insurance by corporations and a decrease in the
demand for private underwriting services because of the corporations’
greater perceived financial security.
Given the relative decline in the demand for private underwriting, the
private underwriters would have needed to lower their premiums relative
to those of the corporations to maintain their market share. However, they
could not afford to compete too aggressively on price, as several factors
conspired to encourage a fall in the supply of private underwriting
services during the war.
First, war changed the nature of the risks insured against in a way that
undermined the value of merchants’ human capital for assessing risks. In
42
Bruchey, Robert Oliver, pp. 193, 201–02.
David and Philip Grim to Watson and Paul, 4 February 1799, quoted by Wright, First Wall
Street, p. 97.
44
The INA’s capital stock was $600,000. Total marine premiums paid (the other branches of
the business were negligible) were $303,129 in 1795, $467,122 in 1796, $1,225,790 in 1797,
$1,304,219 in 1798, $830,976 in 1799, and $912,511 in 1800. Given that most of the risks were
run off within a few weeks or months, the company certainly had a comfortable reserve against
outstanding risks throughout this period.
45
Policy No. 8243, INA Marine Blotters, 20 September 1799 (the risk was from New Orleans
to Philadelphia).
43
176
Kingston
peacetime, the private underwriters’ familiarity with captains, cargoes,
vessels and routes made them good judges of the risks they insured. But
war reduced the relative value of this idiosyncratic knowledge about
individual risks, overwhelming it with systemic risks that affected all
vessels relatively more equally, such as the risk of an unexpected increase
in privateering activity.
Furthermore, although wartime premiums presented private
underwriters with opportunities for high expected returns if they
underwrote judiciously, it also became harder for them to diversify their
risks. An unexpected political or military development, such as a change
of policy regarding neutral rights leading to the capture of a large number
of merchantmen, might impact a merchant-underwriter’s trade income
and at the same time cause multiple underwriting claims against him.
Thus, as a mechanism used to spread risk among the community of
merchants, the system of private underwriting was better suited to
insuring against idiosyncratic peacetime hazards that would affect some
merchants but not others, such as accidents at sea, than to dealing with
systematic wartime dangers which could strike many merchants
simultaneously. In the first case, the lucky could compensate the unlucky;
but if all were unlucky together, the risk-sharing function of insurance
would fail.
A final reason for merchants to be cautious in their wartime
underwriting was that in an age when virtually all trade was conducted on
credit, it was crucial to safeguard a reputation for financial prudence. A
merchant who was seen to be underwriting at excessively low premium
rates would not only earn reduced underwriting profits, but might also
risk damaging his perceived creditworthiness within the merchant
community, which could be calamitous.
Thus, to preserve both their capital and their good name, the private
underwriters had ample cause for caution. For most of them, after all,
underwriting was a sideline to their main business as merchants, and if it
became too risky, they could shift their attention to other activities.
Of course, the corporations also faced increased risks during wartime,
but because their stockholders could diversify their assets in other ways,
corporations could spread risk more widely and could therefore afford to
be less risk-averse than individual underwriters. The implication, then, is
that the war temporarily gave corporations an advantage on the supply
side. Both kinds of underwriters would naturally increase premiums
during wartime to compensate for the heightened risks, but private
underwriters’ caution would be reflected in an additional leftward shift of
the supply curve for private underwriting services during wartime.
Marine Insurance in Philadelphia
177
To evaluate these arguments, it is instructive to compare the premiums
charged during the Quasi-War by the INA and the private underwriter
on one-way and round-trip voyages between the United States and 13
major categories of destination: Asia,46 Cuba,47 Hispaniola,48 Jamaica,49
France,50 Northern Europe,51 Southern Europe,52 the Mediterranean,53 the
United Kingdom and Ireland, 54 the Spanish Main, 55 Martinique and
Guadeloupe, other ports in the Lesser Antilles,56 and New Orleans.57 The
premiums are estimated as
26 10
pirt
10
¦ ¦D ¦ E WL
rt
r 1 t 1
t
irt
Hirt
t 1
where pirt is the rate of premium on policy i, travelling on route r in
time period t, the Drt are fixed effects for voyages on each of the 26
routes r (one-way and return voyages are treated separately) during each
of the ten six-month time periods between 1 April 1795–31 March 1798
and 1 April 1799–31 March 1801 (making 260 voyage-year combinations
in all, 21 of which were omitted due to a lack of data).58 WLirt is a dummy
variable which identifies whether policy i was underwritten by the private
underwriter; and Hirt is an error term. The coefficient of interest is Et,
the estimated additional premium charged by (or paid to) a private
underwriter in period t.
46
Canton, Calcutta, Batavia, Madras, etc.
Mostly Havana and Santiago.
48
Port au Prince, Jeremie, Gonaives, Cape St. Nichola Mole, Cape Francois, Aux Cayes, etc.
49
Kingston, Savanna le Mar, Montego Bay, etc.
50
Excluding the Mediterranean: Bordeaux, Le Havre, Nantes, etc.
51
Amsterdam, Rotterdam, Hamburg, Bremen, etc.
52
Gibraltar, Cadiz, Lisbon, Madeira, St. Sebastian, Oporto, etc.
53
Barcelona, Marseilles, Leghorn, Malaga, Genoa, Naples, etc.
54
London, Liverpool, Bristol, Dublin, Cork, Londonderry, Glasgow, etc.
55
Curacao, La Guaira, Surinam, Cayenne, Demerara, etc.
56
St. Croix, St. Kitts, St. Thomas, St. Bartholemews, Barbados, Antigua, etc., including Puerto
Rico.
57
The private underwriter (WL) insured 1,068 policies between 1 April 1795 and 31 March
1801 and the INA insured 8,359. Peace risks were excluded, as were voyages outside the
categories described above (such as a handful of voyages to the River Plate and Peru), risks
between two U.S. ports, and voyages not originating or terminating in the United States, such as
from the West Indies to Europe or between two European or West Indian ports. One INA ledger,
containing 1,569 policies in 1798/99, is missing. Although it is possible to reconstruct a handful
of data points for this period from other sources, there is insufficient data to enable a meaningful
comparison of premiums in this period, so any policies between April 1798 and March 1799
were excluded.
58
For example, no return voyages to France were insured between October 1799 and March
1801; no return voyages to the Mediterranean between October 1795 and March 1796; and so
on.
47
178
Kingston
TABLE 1
ESTIMATED PREMIUM DIFFERENCES BETWEEN PRIVATE AND CORPORATE
UNDERWRITERS
Number of Policies
Period
April 1795–September 1795
Oct 1795–March 1796
April 1796–September 1796
Oct 1796–March 1797
April 1797–September 1797
Oct 1797–March 1798
April 1799–September 1799
Oct 1799–March 1800
April 1800–September 1800
Oct 1800–March 1801
N
Adjusted R2
Et
t-stat
INA
WL
–1.28
–0.47
–0.19
0.30
0.44
2.83
–0.56
1.03
0.27
–0.97
(–4.66)
(–1.46)
(–0.82)
(0.53)
(1.10)
(4.13)
(–1.49)
(1.26)
(0.61)
(–1.43)
261
217
419
654
966
616
459
473
630
502
143
135
136
91
57
39
47
38
109
85
5,197
880
6,077
0.57
Notes: White heteroskedastic-consistent t-statistics in parentheses. Not reported: coefficients for
239 voyage-time period dummy variables. The “Number of Policies” columns count only those
policies included in the regression.
Table 1 reports the results of this regression. The key finding is that
controlling for route, in the summer of 1795 the private underwriter was
charging, on average, 1.28 percent less than the corporation, but by the
winter of 1797/98, at the height of the Quasi-War, he was charging 2.83
percent more. The differences are both statistically significant and large
enough to substantially affect merchants’ incentives, so it is not surprising
that the table also shows that the relative volume of business shifted
dramatically in favor of the corporation.
Table 2 illustrates this pattern by comparing the average premiums
charged by the private underwriter and the corporation and the volume
of business they underwrote on major routes.
The increase in the relative premiums charged by private
underwriters and the fall in the volume of business are consistent
with the interpretation that the Quasi-War caused a fall in the supply of
private underwriting services. As a result, the private underwriters’
share of the market collapsed and their premiums increased even further
than the corporations’ premiums did during the war. The fall in the
Marine Insurance in Philadelphia
179
TABLE 2
AVERAGE PREMIUM RATES AND VOLUME OF BUSINESS ON MAJOR ROUTES
4/1795–3/96
4/1796–3/97
4/1797–3/98
4/1799–3/00
4/1800–3/01
INA
WL
INA
WL
INA
WL
INA
WL
INA
WL
Hispaniola
(one-way)
7.05
(72)
4.82
(30)
7.99
(210)
9.71
(31)
12.08
(326)
14.63
(15)
9.99
(106)
8.62
(8)
9.83
(205)
11.40
(21)
Hispaniola
(roundtrip)
9.29
(47)
7.6
(34)
12.83
(151)
11.64
(18)
18.65
(168)
20.62
(4)
16.64
(38)
19.17
(3)
17.16
(67)
18.33
(3)
Cuba
(one-way)
4.10
(25)
3.70
(5)
5.09
(41)
4.44
(8)
10.08
(79)
13.39
(9)
10.83
(125)
11.12
(12)
11.09
(184)
11.75
(24)
Asia
(one-way)
7.5
(2)
7.62
(8)
9.67
(14)
7.83
(9)
11.20
(48)
14.28
(9)
13.3
(25)
12.5
(1)
11.85
(10)
13.21
(7)
N. Europe
(one-way)
4.99
(53)
4.53
(44)
5.19
(86)
4.43
(36)
8.64
(145)
9.75
(16)
11.03
(57)
10.75
(10)
9.46
(67)
9.06
(24)
UK
4.81
4.04
5.08
5.00
10.2 11.25 10.64 11.33
8.82
7.48
(one-way)
(16)
(14)
(56)
(11)
(71)
(2)
(67)
(6)
(41)
(21)
Notes: The first number in each cell is the average rate of premium (in percent) on voyages
(in either direction) between the corresponding category of destinations and ports in the United
States (mostly Philadelphia) during the specified period. The number in parentheses is the
corresponding number of policies.
volume of private underwriting was likely exacerbated by an additional
fall in demand for private underwriting as merchants sought the perceived
security of policies issued by the corporations. The resulting increase in
relative demand for corporate underwriting explains the tremendous
growth in the INA’s volume of business during the Quasi-War.
A caveat is in order here: this comparison of premium rates relies on an
implicit assumption that the types of voyages insured by the corporation
and the private underwriter do not differ systematically in terms of the
hidden characteristics of the captain, vessel, and crew—that is, that
there is no unobserved selection bias. This assumption is potentially
problematic. One might hypothesize, for example, that merchants may
have tried to insure the “best” risks privately among themselves,
leaving the “worst” risks to the corporations. Conversely, it could be that
merchants tended to insure with private underwriters only if they were
turned down by the corporations, so that private underwriters got a
disproportionate share of the “worst” risks.
180
Kingston
We are also assuming that there are no systematic differences in the
contractual details of the risks. The INA record reveals a rich variety of
policy conditions. A typical entry, for example, reads in part:
at & from Norfolk to Cape Nichola Mole & at & from thence to Port au Prince,
with a convoy, if not, to proceed from the Mole to Jeremie, or a French port in
the Bite of Leogane or any other port in the Island of Hispaniola & at & from
thence back to Norfolk on the Schooner Nelly, James Brown master, Goods, Drs
2500 @ 15pCt whereof if no Loss happens three percent is to be returned if she
does not go into the Bite of Leogane or to more than one Port besides Cape
Nichola Mole.59
Many of the INA policies contained idiosyncratic conditions of this
sort. For example, many policies gave the vessel liberty to touch and
trade at particular ports, with returns of premium if those ports were
not visited. Others granted returns of premium if the vessel sailed in
convoy or before or after a certain date. Most policies included a
warranty that the goods insured were American property, but some did
not. Some of these were declared to be carrying false papers in an
effort to pass as neutral. Premiums were considerably higher on vessels
declared to be carrying contraband, a profitable but hazardous business.
If it was uncertain on which vessel goods would be shipped, they might
be covered (for a slightly higher premium) on “any good American
vessel.” Voyages to Hamburg or Amsterdam usually specified a return
of premium if the vessel went “north about” to avoid the English Channel.
An important source of variation arose from the fact that insurance
might be purchased at any time from before a vessel sailed to when it
was expected to arrive. Some vessels were even insured when they were
already considered overdue, and naturally these paid a higher premium,
which might also be affected by rumors about storms, enemy activity,
and so on.
Unfortunately, the Wharton & Lewis record does not specify all the
policy conditions, and therefore the possibility of either adverse selection
in the choice of insurer or of systematic unobserved differences in the
policy conditions adopted by the private and corporate underwriters
cannot be entirely ruled out. Note, however, that the qualitative argument
remains valid unless any such selection biases changed significantly
during the course of the war.
Three other developments are worthy of mention. First, the success of
the two pioneering corporations in Philadelphia led within a few years to
similar incorporations in other American states. Increased competition
from other corporations, particularly in New York and Maryland, may
59
Policy no. 3818, 9 December 1796, INA Blotters, ACE Group Archive.
Marine Insurance in Philadelphia
181
help to account for the leveling off in the INA’s volume of business seen
in Figure 1 despite a growth in the volume of trade after the end of the
Quasi-War.60
Second, as a result of both the increased capacity of the American
marine insurance industry and the intermittent political problems
and uncertainties between the United States and Britain, the volume
of American business insured in London fell sharply. One American
merchant in London argued that the increased security afforded
by corporations in America had led to a sharp decrease in the amount
of insurance done in London by American merchants, so by 1810,
“nineteen twentieths” of his consignments from America were insured in
America.61 In particular, American underwriters generally had better and
more recent information about the important West Indian routes, and
this advantage became particularly important in wartime, when premiums
could fluctuate rapidly.62
Finally, yellow fever outbreaks clearly disrupted the private
underwriting networks, as seen in Figure 1. In September–October 1797,
the WL record contains only a single entry: the ship Sickness, captain
Disease, on a voyage from Earth to Heaven with a cargo of 1,500 souls, a
reference to the outbreak of Yellow Fever during which many
Philadelphia residents left the city. During the yellow fever outbreaks
in 1797 and 1798, both the INA offices and Wharton & Lewis’s
office were temporarily moved. 63 However, while the secretary of the
corporation continued to issue policies during these outbreaks, the private
brokers would have found it difficult to fill policies if most of their
underwriters had fled to the countryside.
CONCLUSION
Both organizational forms—corporate and private underwriting—
had advantages and disadvantages. Private underwriting was a longestablished and flexible market-based mechanism for sharing risk among
a community of merchants. The corporate form increased the security of
the policy and expanded the pool of available capital beyond the
merchant community, but it may have suffered disadvantages in dealing
with asymmetric information and agency problems. Indeed, many of the
60
Further market entry in Philadelphia came a little later with the chartering of four new
corporations in February and March 1804 (Fowler, History, p. 69).
61
Select Committee on Marine Insurance, Report, evidence of S. Williams.
62
Kingston, “A Broker and His Network,” argues that the early growth of Philadelphia’s
marine insurance industry (based on private underwriting) in the late 1750s was partly driven by
the disruption of regular channels of communication with London during the Seven Years’ War.
63
Montgomery, History, p. 83; and Fowler, History, p. 60.
182
Kingston
shareholders and directors of the INA also continued both to purchase
insurance and to underwrite privately. 64 However, the Quasi-War with
France arrived at a critical juncture for American marine insurance,
highlighting the advantages of the corporate form by casting doubt on the
security of the privately underwritten policy and making it harder for
private underwriters to diversify their risks.
Although Britain and France were briefly at peace in 1802/03, it must
have been clear at the end of the Quasi-War that a period of considerable
uncertainty lay ahead. Peace with France and Jefferson’s election in 1800
created renewed tensions with Britain, which were later manifested in the
Embargo Act of 1807 and ultimately the War of 1812. In 1800 the INA
complained that:
The late Captures made by the British Ships are truly alarming and none more so
that those made by the Halifax Squadron, as we cannot discern the principles or
pretences on which some of them are made, & of course know not by what
precautions to guard against them. They seem to imply some new rule of conduct
of which we are uninformed, either of late adoption, or by new construction of
former regulations.65
Although Wharton and Lewis’s brokerage had survived the QuasiWar, in 1803 they reconstituted their business as a corporation, the
Phoenix Insurance Company, which obtained a charter in February 1804
with Wharton as its first president and Lewis as vice president.66 Other
brokers carried on for a time, but within a decade of the end of
the Quasi-War, private underwriting in Philadelphia was effectively
extinct. 67 Thus, by bringing the advantages of the corporate form into
64
John Nesbitt, a prominent merchant who was the first president of the INA, occasionally
purchased insurance through Wharton & Lewis at least until 1798, as did other INA board
members, such as merchant John Leamy (HSP MS AMB 95591). In July 1793, when the
board of the INA decided to decline to underwrite a 12-month “time” policy on the brig
Nancy, several members of the board nevertheless offered to cover the risk privately themselves
(INA letterbook, ACE Group Archives, 22–24 July 1793).
65
INA letterbook, ACE Group Archives, letter to Forsyth Smith & Co. of Halifax, 20 August 1800.
66
An Act to Incorporate the Phoenix Insurance Company of Philadelphia, Early American
Imprints, 2nd series, no. 50464. The capital stock was $600,000. Lewis became president following
Wharton’s retirement in 1805 (David Lewis papers, LCP Collection at HSP, McA MSS 015, Box 3,
Folder 102).
67
Robert Hobart was still brokering policies in Philadelphia between 1804 and 1806, but
was facing increasing difficulty due to a growing crisis that ultimately led to the Embargo Act of
1807. New York broker Benjamin Mumford also exited the insurance business around this time
(Mumford papers, NYSL Coll. No. GT 11892; Campbell-Mumford papers, NYHS). The HSP has a
substantial record of policies insured between 1803 and 1815 (Ms Am 36802). Most of the policies
are underwritten by corporations, but several private brokerage firms appear. The last privately
underwritten policy appears in February 1811.
Marine Insurance in Philadelphia
183
sharp focus, it appears that the Quasi-War helped to bring about a
transition from private to corporate underwriting in the American marine
insurance industry.
REFERENCES
ACE Group Archives, INA Collection. Philadelphia, PA.
Acheson, Graeme G., Charles R. Hickson, and John D. Turner. “Does Limited Liability
Matter? Evidence from Nineteenth-Century British Banking.” Review of Law and
Economics, forthcoming.
Allen, Gardner W. Our Naval War with France. New York: Houghton Mifflin, 1909.
Bonnel, Ulane. La France, les États-Unis et la Guerre de Course. Paris: Nouvelles
éditions latines, 1961.
Bruchey, Stuart W. Robert Oliver, Merchant of Baltimore, 1783–1819. Baltimore, MD:
Johns Hopkins Press, 1956.
Clauder, Anna C. “American Commerce as Affected by the Wars of the French
Revolution and Napoleon, 1793–1812.” Ph.D. diss., University of Pennsylvania,
1932.
Connecticut. Statute Laws of the State of Connecticut. Hartford: Hudson and Goodwin,
1808.
DeConde, Alexander. The Quasi-War: The Politics and Diplomacy of the Undeclared
War with France, 1797–1801. New York: Charles Scribner’s Sons, 1966.
Dodd, Edwin M. American Business Corporations Until 1860. Cambridge, MA:
Harvard University Press, 1954.
Dun, James A. “‘What Avenues of Commerce Will You, Americans, Not Explore!’:
Commercial Philadelphia’s Vantage onto the Early Haitian Revolution.” William
and Mary Quarterly 62, no. 3 (2005): 472–504.
Early American Imprints (EAI), Series I: Evans, 1639–1800; Series II: Shaw-Shoemaker,
1801–1819.
Easterbrook, Frank H., and Daniel R. Fischel. “Limited Liability and the Corporation.”
University of Chicago Law Review 52, no. 1 (1983): 89–117.
Fama, Eugene F., and Michael C. Jensen. “Agency Problems and Residual Claims.”
Journal of Law and Economics 26, no. 2 (1983a): 327–49.
______. “Separation of Ownership and Control.” Journal of Law and Economics 26,
no. 2 (1983b): 301–25.
Forbes, Kevin F. “Limited Liability and the Development of the Business Corporation.”
Journal of Law, Economics, and Organization 2, no. 1 (1986): 163–77.
Fowler, J. A. History of Insurance in Philadelphia for Two Centuries (1683–1882).
Philadelphia, PA: Review Publishing and Printing Co., 1888.
Gillingham, Harrold E. Marine Insurance in Philadelphia, 1721–1800. Philadelphia,
PA: Patterson and White Co., 1933.
Goebel, Julius, ed. The Law Practice of Alexander Hamilton, Vol. II. New York:
Columbia University Press, 1969.
Guinnane, Timothy, Ron Harris, Naomi R. Lamoreaux, and Jean-Laurent Rosenthal.
“Putting the Corporation in Its Place.” Enterprise and Society 8, no. 3 (2007):
687–729.
Handlin, Oscar, and Mary F. Handlin. “Origins of the American Business Corporation.”
The Journal of Economic History 5, no. 1 (1945): 1–23.
184
Kingston
Hansmann, Henry B. “The Organization of Insurance Companies: Mutual versus
Stock.” Journal of Law, Economics, and Organization 1, no. 1 (1985): 125–53.
Harris, Ron. “The Formation of the East India Company as a Cooperation-Enhancing
Institution.” Working Paper, Tel Aviv University, 2005.
Hilt, Eric. “Incentives in Corporations: Evidence from the American Whaling Industry.”
Journal of Law and Economics 49, no. 1 (2006): 197–227.
Historical Society of Pennsylvania Collections (HSP). Philadelphia, PA.
Kingston, Christopher. “Marine Insurance in Britain and America, 1720–1844: A
Comparative Institutional Analysis.” The Journal of Economic History 67, no. 2
(2007): 379–409.
______. “A Broker and His Network: Marine Insurance in Philadelphia During the
French and Indian War, 1755–1759.” Working Paper, Amherst College, 2009.
Library Company of Pennsylvania Collections. Philadelphia, PA.
Maryland State Archives. Archives of Maryland Online, http://archivesofmaryland.net.
Massachusetts. Private and Special Statutes of the Comonwealth of Massachusetts.
Boston: Manning and Loring, 1805.
Montgomery, Thomas H. A History of the Insurance Company of North America.
Philadelphia, PA: Press of Review Publishing and Printing Company, 1885.
National Archives and Records Administration (NARA), Mid-Atlantic Region.
Philadelphia, PA.
New York Historical Society Collections (NYHS). New York, NY.
New York State Library Collections (NYSL). Albany, NY.
Palmer, Michael A. “The Quasi-War and the Creation of the American Navy, 1798–
1801.” Ph.D. diss., Temple University, 1981.
Perkins, Edwin J. American Public Finance and Financial Services, 1700–1815.
Columbus: Ohio State University Press, 1994.
Phillips, W. Alison, and Arthur H. Reede. Neutrality: Its History, Economics, and Law,
Volume II: The Napoleonic Period. New York: Columbia University Press, 1936.
Ruwell, Mary E. Eighteenth-Century Capitalism: The Formation of American Marine
Insurance Companies. New York: Garland, 1993.
Select Committee on Marine Insurance. Report from the Select Committee on Marine
Insurance. London: House of Commons, 1810.
Sylla, Richard “Political Economy of Financial Development: Canada and the United
States in the Mirror of the Other, 1790–1840.” Enterprise and Society 7, no. 4
(2006): 653–65.
Westall, Oliver M. “Invisible, Visible, and ‘Direct’ Hands: An Institutional Interpretation
of Organizational Structure and Change in British General Insurance.” Business
History 39, no. 4 (1997): 44–66.
Woodward, Susan E. “Limited Liability in the Theory of the Firm.” Journal of
Institutional and Theoretical Economics 141, no. 4 (1985): 601–11.
Wright, Robert E. The First Wall Street: Chestnut Street, Philadelphia, and the Birth
of American Finance. Chicago: University of Chicago Press, 2005.
Zanjani, George. “Regulation, Capital, and the Evolution of Organizational Form in
U.S. Life Insurance.” American Economic Review 97, no. 3 (2007): 973–83.