Enriching Lives: A History of Insurance in Hong Kong, 1841-2010

Chapter 1 - Pioneer Insurers in the New Crown Colony: Canton and Union

Chapter 1 Pioneer Insurers in the New Crown Colony: Canton and Union There can be no form of commercial activity that so clearly reflects the state of trade as that of insurance. No business thrives better on a free flow of international trade. — Sir William Shenton, in 1935, at the centennial celebrations of the Union Insurance Society of Canton Sir William’s words have stood the test of time. Writing fifty years later, an insurance executive considered them again in a book called Adventures and Perils: The First Hundred and Fifty Years of Union Insurance Society of Canton, Ltd.1 ‘That speaker [Sir William] knew then, as we know today, that trade is not simply a matter of two parties agreeing to an exchange of goods or services for good consideration,’ Alan Chalkley wrote. ‘The conditions under which the exchange takes place, and the value of consideration, are affected by various external factors unrelated to the trade. It can be said that the development of insurance companies like Union reflects the history of their time and place.’ Insurance—one of the oldest industries of the modern world—can trace its origins to the fourteenth century. The earliest incarnation of what we know today as the insurance industry emerged in the Mediterranean cities of Palermo and Genoa, both in what is now Italy. On 23 October 1347, a business executive named Georgius Lecavellum entered into an agreement with the Genoan owner of Santa Clara, a commercial vessel, to bear all potential risks associated with a voyage from Genoa to Majorca. The signed agreement remains the oldest insurance contract ever discovered and is preserved in the national library in Genoa. 6 Enriching Lives Since the fifteenth century, with trade expanding throughout the known world, the insurance industry extended its reach from Italy through Portugal and Spain, to the Netherlands, England, Germany, and the rest of the world. The first product line was marine insurance, which offered financial coverage for total or partial loss at sea. These products were intricately linked to the development of overseas shipping and foreign trade. The growth of marine insurance was integral to the shipping and foreign trade sectors: it not only exerted significant influence on both but was also constrained by the development of both. In England, the earliest marine insurance industry to take off was a joint venture between London’s merchants and their brokers. As foreign trade thrived in the 1540s, marine insurance had been growing apace in England, so much so that the amount on an insurance contract was widely accepted as the basis on which to calculate the costs of intangible services, such as shipping costs.2 At the time, Lombard Street, on the bank of River Thames, became known as the hub of marine insurance activities because of the concentration of Italian insurers there. In 1720, both the Royal Exchange Assurance Corporation and the London Assurance Corporation attained the Crown’s seal of approval to operate in marine insurance; at one point they created a duopoly in the market. However, the duopoly did little to dampen the rise of the individual underwriters. Since the 1690s, the Edward Lloyd Coffee House on Lombard Street had evolved into an information hub for traders, brokers, shipowners, underwriters and others in the industry. In essence, it was the forerunner of the Corporation of Lloyd’s. In 1871, after Parliament passed Lloyd’s Act, which established insurance industry’s legal standing, the corporation 7 Pioneer Insurers in the New Crown Colony: Canton and Union formally registered with the government to become the centre of the marine insurance sector in England. From the eighteenth century onward, the industry grew rapidly throughout England, with London as its centre and with London firms present at all of the country’s ports. As the Industrial Revolution came to a close at the end of the eighteenth century, the reach of the insurance industry, in tandem with the expansion of the economy and trade, began to Fig. 1.1 Lombard Street on the River Thames in London, 1830s. The street became known as the hub of marine insurance activities as Italian insurers concentrated their offices there. 8 Enriching Lives stretch beyond London to other parts of the world—including, in the Far East, Hong Kong and the Chinese Mainland. The Insurance Industry in China during the Nineteenth Century In the early nineteenth century, although England emerged as the world’s...