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tv   Hannah Farber Underwriters of the United States  CSPAN  August 16, 2022 1:49am-2:57am EDT

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eastern on c-span 3, or listen on the podcast wherever you get your podcast. good evening, everybody, and welcome to the law of merchants. i will be the host this evening. thank you for coming and our guest today is hannah farber.
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i know you have a power point to get going, and you might answer this during that, but we are a group of history people here, and thank you for coming, and i am really excited to make insurance fun because i read your book and it's really interesting. >> all right. we good to go? >> yes. >> i am hannah farber, and this is my first book that just came out two or three weeks, i think. before you all have a chance to back away, let me explain myself a little bit as i talk about insurance. this is my book. there's a couple ways i would talk about what this book is really about. this is a book about finance in the age of the american founding, not just the american
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revolution but the decades there after between the revolution and the war of 1812, especially, while the united states has declared its independence but were still figuring about what it's about, and it's about how money fits into that story. right now, a piece of this most famous is money about alexander hamilton, and hamilton is involved in insurance and that's not usually what people talk about when they talk about hamilton, but this is a big business in the age of the american founding. this book is how the powerful, old international business, and this book is specifically about the insurance of commercial shipping and ships. how this business comes to terms with a fragile new republic and insurance is a story of taking
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risks, and one risk is the risk of the united states itself, and it's a story about how political risk taking is intertwined. i will talk about half an hour and then take your questions. i am happy to go with any direction you want. i am happy to go with the money people or the politics people, or the people who are new to thinking about this altogether. i was one of those people. i had no idea when i started my diser taeugs at uc berkeley that i would be writing about insurance. i thought i was going to be talking about the age of the young republic, and i kept coming across references to insurance. when i looked at what these adventurers in this period were all talking about, and at first i thought it was really funny because i thought they were
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going to be talking about noble battles on the oceans and military risks and political risks, and instead they were talking about, oh, god, we have to write to our insurers about what happened just now. this is one of the stories that i really compelled me to start writing about this topic. i will tell it to you now, and it was around this fellow named noah. he's got all kinds of big ideas. he's a utopian. he thinks -- he's jewish, and he thinks they should start a new jerusalem in upstate new york. and then madison is the strong supporter of the republican party at that time and of the war, and madison asked him if he wants to be the commercial
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ambassador, and he asked him because he's jewish, and he is under the impression all jews know each other, and he said, of course, i will go. yes, this seems like a right fit for me. so he's traveling during the war of 1812 on an american merchant ship, and they get captured in the bay of pweus kay, and this capture did not involve any violence or humiliation of the kind american sailors experienced, but they were nice to him and toured him all over the ship and chatted with him and offered him wine, and then showed noah a list of the
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vessels the british captured this past year, the year of 1812, and he said the value exceeded 800,000 pounds of sterling. he said, no, we captured a lot of your ships and he explains to him that the american merchants calculate if one vessels arrive safe out of three there will be no loser. if this was the case it is impossible that the aggregate profits of the one merchant voyage, and in other words the admiral is saying that he and his countrymen are capturing more than two out of three of the ships that americans are trying to get to the continent of europe to do their trading,
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or over to the caribbean to do their trading. however continues the british admiral, if your insurance companies do not complain they will never hear any objections on my part and under such circumstances i have no objection to the continuance of the war. so again, at first i thought it was funny, this admiral who is engaged in the daring war-time adventured is calculating the progress of the war in terms of insurance, he's saying -- he's saying how many ships are getting through? how much money are the americans losing and using that to determine who is winning or losing the war. then i thought about this further and he said something deeper, and it's actually the american insurance companies who are deciding whether the war will continue. they have mistakenly calculated it's worth it to ensure american ventures to france and as well
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as they are doing that wrong they are the ones paying so i have no objections to the continuation of the war. i thought that was very interesting, and it led me towards on story in which insurance is a really highly capitalized transnational business that under pins all all of the chaos of the revolution and the wars, and i started to see references to insurance everywhere. you can see insurance in books like on the left here, this boston directory that lists names and addresses of institutions in boston, and then right after this city director lists the banks of boston and how much they are worth it goes on right away to list the insurance companies of boston and the amount of capital these insurance companies have really struck me from the beginning,
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even when i didn't know what they were doing. if you look at the right you will see a list of premiums of insurance, insurance rates that were published in city newspapers and these are rates that they were charging to merchants, and now they are not subject to restrictions, and in theory, in political terms, the whole world lies open to them at least they can get to by hook or by crook, and what this list really is is an assessment of the safety of the american merchant ships in the world because one of the things that you learn swiftly when you start to research insurance in this period is that most ships don't sink. most stuff gets where it's going under normal circumstances, but
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during the french revolutionary war and the wars of the 18th century, most risks is political risk and most risk of the merchant voyage has to do with wartime and of being captured and war is a lot of the time, and if there is not war there's almost war, anxiety about war, and local disturbances and locals you have to bribe and a lot of mess that americans have to navigate when they are sending ships around the world, and so this premiums is telling you something about your own government when you are an american citizen and it's telling you how safe is this making your fleet around the world. so how did there get to be so many of them? so like i said, this book something a war story. the big growth in the united states insurance sector, especially marine insurance, which is most of the insurance
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in the 1790s, and there starts to be fire insurance, and later there starts to be life insurance. the growth in the u.s. marine insurance sector comes in the french and napoleonic wars. france declared war on europe and vice versa, and the united states is not directly involved for most of this time. the wars pose a threat to the new united states, and to its government which is almost entirely dependent on the taxation of imported goods for the money that it needs to run itself. the united states government needs imports and exports to continue. the wars offer enormous opportunities for american traders who are willing to take high risks/high reward ventures
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to ports that are starved by war or blockaded and ports that suddenly need a lot of new supplies like grain or weapons for the fighting of wars. these are dangerous ventures, as that captain knew all too well and it's easy to get captured in that environment, and there's no navel defense for that period, and it has an out sized merchant fleet that takes advantage of the environment. these are mostly merchants, by the way. they have to be. only merchants understand this business, and coordinating insurers helped american merchants guide them through the landscape. so this was in the 1790s, and the american merchants formed large numbers of insurance
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companies to manage their risks. it's not just a story of formal corporations and there are also informal private insurance that takes place around this time as well, and the really striking development is the growth of the first american insurance companies. so how does insurance actually work? this is sometimes people have about an hour of questions on this and i am happy to entertain them afterwards. the people in my book only recognize marine insurance, and fire insurance, and life insurance started in london but doesn't register so much for them and they think of life insurance like a subset of marine insurance, and they would issue a policy on a sailor's life as part of what they do. marine insurance is an old and deeply international business and it's controlled by merchants themselves. it's a fundamentally international business.
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for this reason you don't get the whole story when you just look at a nation's laws about the practice of insurance. the real way to understand it is through the books that merchants publish and circulate the practice to each other. one thing to understand about insurance, it's a means for merchants to control one another's behavior, and if you have an insurance policy you would understand if you did not behave in a particular way your insurance company would not pay out to you on your policy, and so this is true in the age of revolution as well. the insurer of a merchant voyage can force that merchant to adhere to the terms of the policy in the broader rules and customs by which insurance is said to operate, and these are known as the laws of merchants. they are not formerly speaking
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laws, and they don't belong to any particular country. if you look at the books they contain things that are not laws and they tell you about different ports and different ways of dealing with money, but they tell you what merchants are generally expected to do. insurers are sort of the managers of laws of the merchants. at the same time, the insurer is at the bid of their customer, because insurers are traditionally from medieval times and are expected to behave as if they are part of the voyage. in other words, they were also expected to know generally how this incredibly complicated business works, and they are not obligated the insurer anything the insurer is supposed to know. what does this mean? you have to look in the book to
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find out. there's a long conversation about it, but fundamentally it's a deeply customary practice that is meant to do the business where merchant partners may be operating in very different political landscapes. that's a grain of truth to this idea that insurance works the same way in lots of different places and times. so what happens when -- this is one of the quotes about how the insurance business works. one of these english merchants insists the law has been the same constantly concurring with the laws and nation, and yeah, yeah, yeah, he just doesn't want anybody to interfere, and this is a self-fulfilling prophecy,
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and so what happens when this business meets the united states -- i am skipping the american revolution for now but i am happy to go back to it if there are questions. there have been american insurance brokerages since the mid-18th century in philadelphia and boston, and they tend to surge in number in wartime when merchants are interested in acquiring insurance locally which is convenient for various reasons and the formation of corporations is barred on american colonists, and they remind people of the monopolies, and this taboo starts to break down during the french revolutionary wars, and there's a demand for insurance at home, and they form their own insurance companies and form their own brokerages so merchants are suddenly drawing
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on this old body of knowledge ag these new businesses down in the united states within the form of the corporation. they grow rapidly. a picture of an insurance policy. we'll come back to it. this is the work i did for this brokerage. how much capital is held by american insurance companies exactly. compare that amount of capital to the amount held by american banks which banking the other really big, really early financial business in the united states. insurance is never as big a business as banking. but perspectively keeps pace with american banking. this is the number of insurance companies and banks. here are the parallel even more striking how similar these numbers are. but insurance companies have never attracted the same amount of public, political attention that banks have. i can talk about that later if
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you're interested. these new cohort american insurers have this mindset that they're generally complex and lucrative and business belongs to themselves and could not really be managed or regulated by the united states. there is some sense to this. the insurance business is very, very complicated. insurers simply know things about how the business operates. not how merchants work. not how global is going. deeply and carefully listening to their international news networks about what's going on overseas. they know things that the first american politicians just don't know. things that american juries don't know. during the american revolution a
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movement that says regular juries should try to adjudicate insurance law cases, lawsuits over insurance and they can't. they can't do it. they're trying to get a regular jury to understand what a merchant is saying about why this insurance company should pay him and they can't do it. this is a nightmare. we have to stop. legislators try to be involved and they don't do a good job. how the business works in order to regulate it. information gatherers and managers of global affairs. when the french revolutionary wars began. the united states doesn't even really know how many of its ships were captured. ask insurance brokerages and corporations and correspondents with them to tell them what kind of losses americans have suffered. from the u.s. government, this is an extremely important strategic piece of information. what do insurance companies do
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with all of this capital that they have and all the political influence? for the most part, they do things that support the united states. they take american risks in a lot of different senses. so, american insurers buy federal securities just to say they buy u.s. government debt. they're certainly the largest group of corporations that are holding american bonds and they're supporting those bonds as value and making them seem like they're good and reliable investments. by underwriting u.s. trade, by doing their business. they're making a bet on american commerce. they're wagering that in spite of the raging wars. the fleet would on balance be profitable. they do provide the fledgling u.s. government with information about the safety of its
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merchants and the world. this information that it was crucial for its policymaking. and by supporting american overseas commerce, they allow the federal government to collect its most critical stream of revenue, which is customs. so, these american underwriters have vowed their loyalty to the country and setting aside some significant lucrative gray areas in the law, they generally follow the law. they generally demand that their merchant customers do the same. i say generally, there are some important places here where insurers are sometimes dodging the law or sometimes basically when the government isn't equipped to say what the law is, sort of determine what that law should be. and i can talk about that later. i don't think we should underaccount the ways in which the ways a rich business vow
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against loyalty to their country has a sort of a political relations effect. one of the things that i talk about what happens in the charter. they are chartered by the states and incorporated by the states and the states give them charters so they can be legal corporations and that is, in itself, a deal that the u.s., that the state governments are making with groups of merchants. the deal is that the insurers get their corporation, which allows them to accumulate capital in a variety of convenient ways and pass bylaws that affect its members and what they're getting from the united states government is sort of this, what's the word? this endorsement from the government that says they are safe and secure and so then the
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insurers are doing all of these good things on behalf of the american merchant fleet in a way they're sort of repaying this bet that state governments have made on them. so, in general, american insurers that pay off, they make huge amounts of money during this uncertain period. they make money off the federal bonds that they invest in. they get political security from their charters. the legal regime is sort of formed in a way that suits their interest. and under a regime of relatively low taxation, american insurers are able to make and keep very large sums of money. insurers shoulder some of the republic's risks and show in return a lot of money and to a significant degree since their interests. there is, of course, some overlap. i'm not saying that merchants and the government are totally separate groups.
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you know, many people who are insurance company leaders or big investors are themselves in politics. but what i'm interested in really is how these systems of governance by state and governance by insurance interact with one another. so, here are some charts i gave you about the dividends of insurance companies as percentage of shared value. so, they actually issue every six months, which is pretty wild. their dividends fluctuate really wildly through this unsettled period. insurance companies do the best when everybody thinks there is about to be a war, but there isn't one yet. they do the worst at the end of wars where they're paying out wartime indemnifications and no longer able to charge maritime rates. dividends flucuate a lot which
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are still pretty darn impressive but stick to a much more stable schedule. insurance companies themselves the institutions that manage risk and investing in them offer some risk but in general they don't go bankrupt. they generally do really, really well through this period and they accumulate this huge amount of money that they then invest in the united states. so i'm open ended with where we go from here. but a lot of other ways that insurance companies secure themselves. i talked about incorporation. this is sort of the deal with the state. insurance companies and brokerages also collaborate really extensively with one another. they exchange rates. they don't tend to compete very much. they realize very quickly they do better if they standardize their rates with one another. they are mostly experienced merchants themselves with shared interests and they share
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information with one another. they are creating a shared opinion on how dangerous the world is for american merchants. they collaborate oftentimes on expensive shipment of goods will be insured by multiple insurance companies and brokers and then that ship might get captured by say one of those british frigates and then the insurance companies and brokers collaborate to try to press their case in court to try to say that the capture made by the british frigate was ilegitimate and that the british government should return the goods to their merchant customers or if the merchant sort of surrendered the goods to the insurer then the insurer gets whatever it reclaims. they are active in foreign courts, especially british courts trying to get property returned to americans through a legal process. insurance companies have really close relationships with banks. this is something that's been really understudy.
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insurance companies have similarities with banks with how they operate. a bank is allowed to make loans to a merchant who offers a certain kind of note financial instrument, an iou as collateral. an insurance company is allowed to lend to a merchant who offers a ship as collateral. one of their side businesses. if the ship sinks, they don't get the money back. so, insurances like banking are also ways that banking is like insurance if we want to get real nerdy at the end of this talk, i am happy to uctaabout that more. but perhaps even more significantly, insurance companies and banks are often founded by the same people and they have the closely connected back ends. insurance companies need somewhere to stash their money so it's accessible to pay off claims. they also need their money to make money. so, what to they do? they invest in federal
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securities and they invest it in banks. as i said, also a cultural aspect to this project. so one of the things that insurance companies like to do is present themselves as boring and uninteresting. and there's a wonderful story near the end of this book about how this works. and the story is this. so this is 1825. this is quite late in my story. but this is a year when a lot of people are trying to push incorporations through the new york state legislature. there's sort of an economic bubble and a bubble in corporations. people think they can get rich quick by starting companies. so some legislators are onboard with this and some are suspicious thinking that new york doesn't really need all of these banks and insurance companies. so, i have this wonderful set of letters between two merchant brothers. one of them is manning the business in manhattan.
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the other one goes up to albany to try to get the corporation across. they don't send the manhattan paper pusher to the state legislature. they send the sailor, they send the sea captain. he literally writes to his brother is the way he is making headway among these suspicious state legislatures who think this is a cash grab of some kind. i pass myself off as a sea fairing gentleman. somebody who couldn't possibly know anything about incorporating corporations just for the purpose of rapidly accumulating other people's money. no, no, no. i'm just a sailor. so, when i told him i was a sailor and knew nothing of the banking concern, they polightly excused me. he goes and tells them old sea stories and get bored and waits in the quarters and listens to the gossip or the legislators
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talk about who is going to vote for what. by tying himself to this ancient world of sale, this perspective insurance company founder separates himself from the world of high-flying finance with which insurance is totally involved. but much more than thinking it is able to pass itself off as innocuous because it is connected to the real world ship sailing and it doesn't sound like a bubbly kind of thing to legislators. so, they do succeed in getting their incorporation at the end. another insurance company strategy is coming across as very complicated, sophisticated, important assessors of global risk. so, when americans are fighting about whether they should embargo all global commerce in
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1807 and the british and french are starting to pick off american merchant ships more and more, a lot of the insurers are saying they don't want an embargo. they think that they can manage and assess the risk to american ships in the world. they don't want the government to interfere. so, this legislator samuel smith says don't shut down global commerce of the united states. our insurance companies will regulate the risk of commerce with judgment and precision and therefore confide to them the commerce of our country. don't do it through the government. the insurance companies are the real regulators. and i like this quote because, you know, i think today a lot of times we talk in terms of the government versus the free market. but what's clear here is that samuel smith is talking about the real alternative to legislation being not nothing,
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but insurers as governors of american at risk. are insurance companies. pretty interesting it sort of echoes the quote i gave you at the beginning from about six years later. the british forget admiral going insurance companies, as long as your insurance companies don't mind, i'm okay with the war of 1812. samuel smith an american merchant or senator saying our insurance companies will regulate the risk of commerce with judgment and precision. they're governing american commerce. don't need the states to do it. sort of fascinating high political stakes to that comment. insurance companies also evade the law. i said they really vocally pronounce that they obey united states law and, indeed, enforce united states law with respect to their merchant customers. but there are plenty of insurance policies, especially during the war of 1812, which
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merchants generally do not want. they want to be able to trade wherever they want to trade. and so they use all kinds of work arounds that their complex business allows them to use. what i put up on this slide here is an insurance policy that is made out to jonathan door and company of boston as agents. okay, so, this policy is implying the sort of fig leaf of saying that jonathan door is not really the one who is being insured, but who is being insured? the squiggly line gives it away. oh, they're just the agents who need this insurance policy that is currently illegal and illegal trading voyage for citizens of the united states. it's just cargo of this swedish vessel here. this is not a swedish vessel. this is blatant smuggling. insurers are facilitating the
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invasion. all right. so, sort of a final ambiguity here is who is in charge? is insurance, is marine insurance a business under united states law? if so, why? if not, why not? sounds like one of the essay questions i just assigned for the end of this term. i think this is a particular puzzle because insurance is itself a form of governance in the age of revolution. insurance is self-governance even though it's an imperfect one that has threaded through the institutions of the state of itself. it is helping to make the state and shaping the terms, according to which the state governs the business which it still cannot fully govern because insurance is so wealthy and complicated and so international in nature. so, i left a couple of other things up on the slide that we
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can talk about in a second. that one of my key contemporary conclusions that i offer in this book is that it's still true that the governments are always in the business of risk management. there is climate change, health insurance today and so whenever you change the way risk is handled, you're changing the way the state itself works. and i'm happy to talk about that. more extensively, as well. a few things we could talk about. the material culture of insurance, landscapes and architecture, american revolution and other things in this book, which i hope you'll buy for all your friends in the insurance industry for christmas. slave trade insurance and other contemporary connections. so, i'll leave it there for now. and i understand jodi is going to take questions for us. thank you for having me.
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let's chat some more about insurance. >> yeah. yes. thank you so much. that was great and i have personally read the book. i have, promise. it is really fascinating. in the beginning and i know nothing about insurance but i am a history nerd and so cool to read this book and look at things that we did learn about in school and do know about american history and add this whole other layer of these people making up the rules and it was great. so, one of our questions in the question and answer is i want a signed copy of the book and i am happy to say you can get it through the mark twain gift shop signed by hannah starting tomorrow because the link is broken at the moment. but, i will make sure that gets sent out to anybody here tonight the link to buy the book and available through the mark twain book shop and supporting hannah
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and us all at the same time. richard asked that question and i hope you buy the book tomorrow. all right. we do have a few other questions already. so, let's start with lorba at the top. were these mutual companies or stock companies? it just moved on me. if stock companies, what kind of people invested in them? >> okay. so, definitely -- let me back up the difference between mutual companies and stock companies. mutual insurance company is not about holding or accumulating capital. it's supposed to hold just enough money from a group of people to cover any potential losses. this is a form that is occasionally successful, especially with fire insurance companies. this is not the model that marine insurance companies operate from. and even some fire insurance companies and marine and fire start mutual or call themselves mutual companies but actually
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convert to stock companies, which is to say companies the purpose of which is the return of dividends to their shareholders. so, marine insurance is a much bigger business than fire insurance from the start, which is one reason that mutual doesn't really work for it. it's a big cash business because you might have a voyage that is worth $1,000 or $2,000 or more and so your premium can easily be a couple hundred dollars. fire insurance policy, your policy might be $1,000 but you might pay only $2 or $3 a year. what everybody hates about the mutual companies is like sometimes they run out of money because they hold so little and then they come back. the company has to come back to the policy holders and be like, you know, we need more. the policyholders get so mad. they're just like livid. you know, as you can imagine. people want more money from me.
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so, it tends to be groups of merchants informally pulling their resources and then formally through the corporation who holds stocks. often other merchants. there's this wonderful quote from one of the company secretaries who works in boston in the 1800s. every merchant is involved in an insurance company because another way to buffer their risks. other people who have -- and people whose money is tied up in land, obviously, don't have so much money to tie up in commercial affairs or in corporate shares. but i have also seen letters like alexander hamilton writes to a wealthy widow at one point and she's like, what should i invest in? he says you should invest in federal securities and insurance shares and this combination that will make you profitable and safe. so, women invest. it's a thing to do with their money that doesn't require too
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much direct management. but especially the port city people who are already handling this form of wealth. >> great. all right. so, kind of on that note i know alexander hamilton is not a president, but were any of the founding fathers involved in the insurance venture? >> so, especially robert morris is a merchant underwriter. he comes up in my book a fair amount. because he, he's trying to finance the american revolutionary war. and the way he's doing that. he is an underwriter. he's got like a partner and he underwrites with his partner. not incorporated. he knows that complicated international business. and he's also during the revolutionary war in contemporary terms he's trying
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to get u.s. securities underwritten by amsterdam financers. he wants to sell the amsterdam financeers and whether that debt sells to the amsterdam buyers or not. he's literally getting the united states underwritten and i don't think it is a coincidence he would do that after the experience with the insurance business. when he comes out in his fancy bows because he made a lot of money a lot is through insurance law which is that big, early, this is where early lawyers make a lot of money. people do land deal, but it's speculation. the merchants mustering cash and it's just obvious that insurance lawsuits and insurance business and institutions are the ones who have money in the early united states. they're doing big deals with
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each other. they have overseas connection that they're drawing on for wealth. hamilton is one and then the third name that you would probably know is daniel webster who is known for his much later political work but who makes his big pile of money also as an insurance lawyer and not only just as an insurance lawyer, but working on behalf of certain claims against the spanish government for their ilegitimate captures of americans during the wars. so, that's how webster makes his big pile that fuels his political rise. >> the other name that i would like you to briefly mention on for all of our connecticut people is silas dean. his governor or brother, i don't remember the relationship. >> right. so, american privateers have
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their own insurance outfits. it's one way of investing in each other's voyages. you see these insurance rates. so, a ship might be, it might be a privateer ship that is planning on making money by capturing others and a letter of mark and some guns and mosly means it is going on a voyage and during the american revolutionary war, yeah, these privateers are ensuring privateering voyages which is one form of investing in them. if you're underwriting a privateering voyage, that's one way of making money and fighting the british at the same time. >> awesome. we have so many questions. we'll probably, we won't be able to get to all of them. we'll get to as many as we can. we'll send them to hannah and put them in the chat for after this ends. obviously everybody is
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interested, which is great. the next one has a couple votes in our question and answer forum. how did hartford become insurance capital of the united states? >> so, i am an expert in the really early part of this. hartford being on a river. lots and lots of early new england towns on rivers and especially in massachusetts, but also in connecticut. if you count on the river, you're going to possibly have a little insurance brokerage for once the age of incorporaing begins. you might have a bigger corporation or corporation that is next to your local bank, which is, again, one way of the higher stratum of early local merchants managed to, are choosing to pool and manage their risks and make money at the same time. so, a lot of times these
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corporations depend on local knowledge as they get started. my understanding is that hartford becomes a big insurance capital later in the 19th century. and so first by the -- so industrialization really fuels the fire insurance business when big corporations start needing fire insurance and paying a lot for it. insurance becomes big money that way. life insurance becomes big business in the middle of the 19th century along with urbanization. when more people are living lives where they have these desk jobs and sort of one of these like protestants and one good thing you can do for your family if you're a good upstanding husband is to make sure your family will be provided for in terms of money after if you
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prematurely pass. that's when cities like hartford start becoming prominent insurance for insurance when it becomes a business more for the public. >> are there any contemporary comparisons between maritime and commercial aviation insurance? >> the insurance today that is most -- okay. the story that is easiest to see is the way contemporary insurance becomes domesticated and becomes the story of state-regulated corporations and the aflac duck and the geico and domesticated business and my understanding is that the marine insurance business is actually kind of old-fashioned in the way that it operates and has some
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similarities to how it functioned a long time ago. my guess is that aviation would work this way, as well. there are still problems like pirates and international political crises that befall commercial shippers. if you go to lloyd's you can still see they have a book and they handwrite in this book and ring a bell when there is a ship wreck. it's really old-fashioned. but it's actually and it's old fashionness it makes it less like the business in my book because the business in my book is so political and it's so up to date with the political events of its own time. so it's actually the -- like my hypothesis and not allowed to speculate because i'm a historian. but the insurance business, which is transnational, it's big, it's shady, it's huge and it's very political that insure against things like wars and
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global catastrophes and political changes. that's most like the sort of wildly political and up to date insurance of the age of revolution. some things about shipping haven't changed that much. and a lot of cases, you know, political risk always seems so of the moment that you're in but the fact of political risk is something that has never gone away. even when contemporary american insurance companies like to make it seem like they have nothing to do with the world of politics. the political world is the framework in which they operate. >> awesome. so, related to that, there's a question and then i have a comment related to the question before you answer. the question is did you find insurance company executives later went into politics and you just mentioned politics, as well. one thing i really enjoyed reading in your book was this
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kind of dichotomy of being a political entity and making its own laws but yet we're of the people and we're like, you know, those kinds of things. and i love this politic aspect. so, do you want to talk about executives that went into politics or politics before they went into the insurance? >> these people are a lot of schemers in the age of the american founding who are really interested in politics and they're really interested in business. and who actually see politics and business as more interconnected endeavors than maybe we would see today. so, a long forgotten guy named samuel bloget jr. who is born in new england and moves to philadelphia and part of the founding of the joint stock american insurance company in the 1790s and he has this radical idea that it's a thing. it was a thing at the time.
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but he's both very like republican and into self-governance and so into corporations. he thinks that corporations are a form of governance and should be like these tools that americans use to rinforce their own civic fabric. because if your co-financial operators in adventure, then you are, you know, you're going to have a lot more at stake in wanting your countrymen to succeed even then if you're just living in the same town. >> right. >> the whole world, the whole country should be connected to every town and everybody should be invested in it. it almost comes full circle to being a socialist project. if everybody is like got all their wealth shared in the same venture, it's almost like so private property and almost no
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private property at all. there are like i said hamilton webster and morris and legislators who nobody well known today who are in the insurance business and, again, encourage their fellow citizens or their fellow citizens to think in terms of, to think of politics in terms of losses and indemnifications so like defending britain and one of these legislators from massachusetts who is an insurance company founder says, you know, okay, he's like, yeah, the age of revolution. it's pretty crazy. call it that but american ships are getting taken by everybody. the british, the french, the pirates and the danish but the british do capture a lot of our ships but also the best indemnifiers. when they do wrong, they compensate us.
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trying to get americans not to think of the jeffersonian and think more in terms of the bottom line in terms of their political mood. they're not able to stop the environment and stop the war of 1812, but neither of those things actually last that long and it's even a less period of time that commerce really comes to a halt. before long merchants and their insurers find the work arounds to start trading again. that is what infuses politics as far as i'm concerned. >> great. so, this one says to the acchew wearial data, the insurance companies use to determine the rates in early america. give us an idea of the relative dangers of ocean travel. for example, what percentage of ocean voyages did the early insurers expect to end up
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wrecked by storm or pirate? >> great question. so, generally they don't operate in an acchuarial way. not tables of likely amounts of losses and they're generally not calculating. the accumulated information according to which they operate, they can do business is sort of the laws of merchants, those merchant handbooks. what is likely to happen. their general sense of the danger and to a lesser extent the captain. that's sort of a reputational thing. but generally speaking the risk of just an ocean voyage like what they would charge for one way across the atlantic is like 1% to 2%. it's quite low durs peacetime. the problem is most of the time it's not peace. a little more like if you're going in hurricane season to the caribbean and you can see that
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go up like 4% or something like that. those rates don't fluctuate so much and you can find them because some insurers separate out their books because you can get risks on risks of the seas or get an insurance policy against all risks. all risks include capture, political goings on and it means you hit a rock, hurricane, stuff like that. that tends to be quite low and consistent just a couple and then the political stuff that goes like that and i put some of those in the book. suddenly something happens and rates spike to certain destinations and an unlucky guy who needs it at that time and the insurers gather more data points and they settle the rates back down. >> awesome. corporations considered people by insurers/merchants at this early date?
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so the answer is yes but not in a very important way. the handbooks of this time period are, yeah, the corporation is a person. they need this in a very limited, functional way under law. in terms of how the company can act in a court. in other words, if you had a murchert partnership and you had to act as two people in a court of law and it's 18th century and people die a lot. that could be really inconvenient because suddenly you're in an estate conflict and absolute nightmares under british laws. there's the cat. >> there she is. i told you she would make an appearance. >> okay. so what was i talking about? corporate. the thing is that being a person under domestic law doesn't really get you that many rights at this time. so, like the states today i feel like of corporate personal hood
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are higher because there is a greater and more extensive discourse of rights in a more modern sense in a more material sense. like back then, you know, the rights of an englishman and free speech. it just wasn't so incredibly relevant to the life of a corporation. so, yeah, legally a person. but it's not, that's not an interesting question to them at the time the way it is today kind of because the government changed its relationship to people. >> awesome. all right. so, this one says another example of insurance companies creating change in durham, north carolina, had wall street that started with the 1898 founding of nc mutual to provide insurance to african-americans who could not get covered from the insurance companies. in just a few years the largest black-owned business in the country. now, i know in your book you
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talk about the slave trade and the insurance of that and everything like that. did this come up at all during your research? >> no, i sort of veer off in the mid 19th century. so, yeah, unfortunately, that's not so much the world that i knew about. there are not enough capital holding black port city americans to have their own corporations or anything like that. it's probably likely that at some point there are investors. there aren't that many women in my book that are just looking at this one particular manifestation of this transnational system with the people whose names are on their paperwork and sort of formal owners of this information. it's a particular group of port city elites. a lot of the people who come in after the loyalists went away during the american revolution. sort of this new generation of
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elite that comes to occupy their economic niches oftentimes from like outlying towns and they come into boston and come into new york and philadelphia and then they set up shop. and they're the people who found like historical societies and get papers to them and places like the connecticut historical society have a lot of these early insurance papers. a ton of investing out there. the corporate records actually become harder to find in the mid 19th century. corporations whose lives are a little bit more chaotic and they're not tied to the lives of founding elites in the same way. >> all right. we have two more. at what point did insurance and banking joint up in the national and then state banks? also, love to hear more about risk insurance changes. how risk insurance changes the
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state. >> so, banks -- so insurance companies as state chartered businesses their lives are very intertwined with state banks. i think i mentioned that insurance companies need places to put their money so they put them in their friendly local bank and they buy shares in their friendly local bank so these numbers of charters often track really closely together and often the same guy will like have a hand in, you know, both local corporations at the beginning there are often, they are often political allies that found the same kinds of corporations. what is interesting is how corporations lose their flavor because states find it easier and everybody sort of just decides that proliferation and banks and insurance companies are in their best interest. insurance companies invest in banks and banks do a lot of services for insurance
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companies. they like, so if a merchant essentially pays for an insurance policy with an iou and then -- which he has to pay once the ship comes in and legally binding iou and the insurance company gets it at the bank and the bank can sort of service that note as necessary. like if the merchant needs to renew it and can't pay it yet but they can manage that for it, they handle the interest payments on whatever note it is or even insurance company can say basically sell the note to the bank and say put the cash in our account. financial services is one thing. banks also do this thing and this is very in the weeds. here we are. i'm good with it. banks have to decide what they're going to accept as collateral when they give people loans. certain kinds of merchant paper is acceptable and also decide to prop up the value of insurance company share we will accept it
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at face value as collateral for the loan we're going to give you. they nest together politically. the second question about risk insurance. >> i would also love to hear more about risk, how risk insurance changed the state. i don't -- >> yeah, so, if a person wants to clarify the question a little bit more. but one thing that insurance people do is just, for example, is help the state decide whether commercial property is or is not american. just sort of a funky question to be asking. but in an age of war fare, there's a lot of intricate international law about what property is allowed to be confiscated or not. an enemy's property or a friend's property on an enemy's ship or like a friend's property
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but it's weapons and it's going to an enemy or you're like running a blockade for something. but you have to think about this in a world where american commerce is crucial to the country's financial success. so these questions about what is an american property or not is really important. how do you know what's american or not? we think of this in terms of citizens, but stuff is also like more important at this time. stuff is worth a lot more than people are. so, how do you decide. essentially the american government when it's trying to decide if americans are breaking laws or not, they go with whatever the insurance company says because they're like, all right, if the insurance company thinks this is legit enough to do a payout, then the american probably wasn't smuggling because the insurance company probably wouldn't put up with doing anything illegal. so, this round about way the insurance company is actually incredibly influential in determining what is american and what isn't.
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that's a real good question. >> awesome. so, one last question in the q&a and then we'll let you go. but it says the british, most of the british marine insurers are mutual protection and associations. if most american carriers were stock companies, is there a reason you file for the difference? >> yes. there's a british law in 1720 that says there's only two companies that are allowed to sell insurance as joint stock companies. the royal exchange assurance and the london insurance company. everybody has work arounds and all the marine mostly moves to lloyd's of london which is like this clearing house for independent operators. the united states doesn't have such a law. again, the united states moves towards the system where the state governments accommodate a lot of corporations.
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and in the case of banks in the northeast, this tax on banking capital funds like the majority of state government operations for a lot of the 19th century. they don't get around to taxing insurance company capital for like a generation after they start taxing bank capital. insurance company less capital than banks but hugely important just to the quietness through which it's handled. and the corporate profits, again, they fluctuate a lot but are really, really significant and attract a lot less political attention than banking because people are sort of familiar with the rhetoric of the sinister monopoly bank but nobody knows what an insurance company does. >> that's still true, right? >> still true today which is why perhaps other people would like to think about this topic today. >> awesome. thank you so much, hannah. i can only encourage everybody in the a okay.
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thank you guys. all right. all right. we're we'll just get going. um, great. okay, so hi everybody welcome to disability in american history and culture. it's great to see you all and hope you had a great spring breaks and so our plan for the day. we're gonna start with a review. i assume that you haven't spent your spring break learn thinking about our class. so this is designed to just get you back on track to think about some of the most important themes and ideas that we've discussed in our class so far then i'll lec o


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