Overview
We have considered the history of GA from several angles and constructed a fairly detailed picture of the institution itself. This chapter will now zoom out and consider how GA interacted with other risk-management instruments that shaped maritime trade in early modern Europe. Once established, GA became, in effect, a limited form of mutual insurance for certain types of damages, because it was known in advance that sacrifices would be shared between all players. GA was inherently limited, of course, because it could share risks only between those who were already financially implicated in the venture. Yet it was nonetheless an instrument which blunted the impact of mishaps by sharing costs, thus decreasing the risk of entry into a venture, especially when combined with other mechanisms for the distribution of costs and damages.
In order to assess GA’s importance in this respect, as well as its overall impact on the structure of commerce more generally, it is necessary to contextualise it and to examine its interaction with the other instruments which dealt with risk and other institutions used by early modern actors. Only by sketching out GA’s position and relative importance within this institutional topography can we hope to make pronouncements about its role and significance in structuring exchange. The most obvious question in this respect concerns GA’s relationship with the best known and most ubiquitous tool for managing risk: premium insurance. Invented in the fourteenth century and in wide use by the seventeenth, premium insurance transfers sea risk to third parties, who are not necessarily interested in the venture, distributing risk beyond the trading community, and ultimately allowing anyone with spare capital to shoulder the burden.
1 For the origins of insurance, see L.A. Boiteaux, La fortune de mer: le besoin de sécuritè et les débuts de l’assurance maritime (Paris: S.E.V.P.E.N., 1968); Piccinno, ‘Genoa, 1340–1620’, pp. 46–77; Addobbati, Commercio, rischio, guerra, pp. 113–16. On the mingling of ‘sharing’ and ‘shifting’ in premodern insurance see Giovanni Ceccarelli, ‘Risky narratives: framing general average into risk-management strategies (13th–16th centuries)’, in Maria Fusaro, Andrea Addobbati, and Luisa Piccinno (eds), General Average and Risk Management in Medieval and Early Modern Maritime Business (Cham: Springer, 2023), 61–91. Did GA still have a role to play after the widespread adoption of such an efficacious instrument?
This chapter outlines the mechanics of the relationship between GA and premium insurance in Tuscany and other parts of Europe – a far from clear and straightforward issue, given the different provisions and practices that existed regarding the two instruments. It also examines the interactions between GA and sea loan, another ‘archaic’ risk-management instrument that has suffered from significant analytical neglect. A case from the archive allows us to uncover the way that these tools were used in concert: GA, a first line of defence, drew in the creditor of a sea loan, who in turn had insured the loan with the help of local underwriters. Some of the receiving merchants had offered security for the loan, some had then underwritten it, whilst some underwriters were from outside the circle of participants. The venture was thus undergirded by several security nets that bound participants and some outsiders into a tightly interconnected community of risk. Though a favoured recent analogy of business historians has been the risk-management ‘toolbox’, it is argued that this system might be seen more profitably as a water filtration system, with costs passing through several successive institutional layers to achieve maximum dispersal. With that being said, the findings once again demonstrate the extent to which early modern GA was above all the shipmaster’s tool. Ships were very rarely insured in this period, and in some situations, GA was a master’s only line of defence. Extraordinary expenses, moreover, would have proved ruinous had masters not been able to fall back on GA. Financial analysis of the case allows us to demonstrate in quantitative terms how ship interests could do very well out of GA, allowing serious operational costs to be defrayed.