Chapter 4 - Structural risks and marine insurance: problems and case-studies

Summary

Thus far, event uncertainties have found their place mainly on the supply side: they affected the functioning of the market itself. In contrast to these, we must now consider the structural risks implicit in demand functions. They conditioned the limits to which shippers and shipowners were prepared to go in seeking protection. In turn, the evolution of premiums made apparent the sets of predictions – either consciously or intuitively – made by underwriters. As such, the category of structural risks belongs to rationality, to the mentalities and mental furniture at the time. Needless to say, it should not pass without notice that the prosperity of maritime enterprise drew on improved technical skills – more accurate map-making, for example; and more precise chronometers, which endowed navigation with greater precision and more assurance. Alongside such achievements, came the outstanding refinement of pròbability analysis and actuarial valuation. The publications of Edmund Halley, Abraham de Moivre, Willem Kersseboom, Nicolaas Struyck, Antoine Deparcieux, Pår Wargentin, Johannes Süssmilch have stood the tests of time; and the thinking of Kenneth Arrow, Milton Friedman, Frank Knight, Oscar Morgenstern has continued to enlarge a long and remarkable bibliography. The practical problems of forecasting and prediction in eighteenth-century marine insurance, however, remained in the margin of these intellectual achievements. A gap yawned between theory and practice.