GA and Premium Insurance
A central feature of this interlocking risk-management structure was that GA payments were, unless specified otherwise by the policy, automatically covered by underwriters of marine insurance contracts.
1 Casaregi, Discursus legales, vol. 1, p. 17; the exception was Venice where the standard insurance policy excluded Average: Karin Nehlsen-von Stryk, L’assicurazione marittima a Venezia nel XV secolo (Rome: Il Veltro Editrice, 1988), pp. 216–44. The underwriter would pay proportionally, applying the GA contribution rate to the total amount they had underwritten. For example, if the GA contribution rate was 5 per cent, the underwriters’ obligation would be expressed as ‘5 pieces for every 100 pieces insured’.
2 Rocco, Responsorum, p. 410. If the insured had purchased insurance for 100 per cent of their goods, then the underwriters would pay the entire GA contribution; if they had insured 80 per cent of the value, the underwriters would pay for 80 per cent of their GA contribution, and so on. The standard printed Tuscan insurance form, which provided the standard template for underwriters across Europe, states that the underwriter ran ‘at all times the risk attached to the undermentioned merchandise, of every sea-related thing, of fire, of jettison into the sea, of reprisal, of theft by friends or enemies, of every event, danger,
fortuna, disaster, impediment, or accident, even those that cannot be imagined’.
3 Quoted in Addobati, Commercio, rischio, guerra, p. 120. The form makes no explicit mention of ‘Average’ or ‘General Average’. The standard version of the contract was given official backing in 1524 thanks to reforms passed by the Florentine
Ufficio di sicurtà,
though the wording had barely changed from the fourteenth century.
4 Ceccarelli, Risky Markets, pp. 15–16. The absence of any mention of ‘Average’ is therefore in accordance with what we established in Chapter 2 about the early modern emergence of the word ‘[General] Average’ as a catch-all term for common contribution.
5 See pp. 54–5. It is nevertheless clear from the form that insurance covered all sea risks, and that GA contributions fell under this. This is consistent with contemporary understandings of the term ‘risk’, which, though it was to assume the meaning of ‘(the probability of) an undesired event or danger’ in the modern period, in its original form meant simply the concrete manifestation of any eventual profit or loss resulting from a venture.
6 Simona Morini, Il rischio: da Pascal a Fukushima (Bologna: Bollati Bolinghieri, 2014), p. 9; Addobbati, Commercio, rischio, guerra, p. 7. This coverage of GA by insurance assumes particular relevance for risk management in the seventeenth century because premium insurance was becoming ever more prevalent. It was already undergoing a long transformation from a deluxe product reserved only for those ventures presenting the highest risks and rewards to a quotidian instrument employed in the majority of voyages.
7 Addobbati, Commercio, rischio, guerra, p. 114. The increasing feasibility of insurance, as navigational technology and knowledge improved and violence was disciplined, is reflected in falling premium rates across the seventeenth and eighteenth centuries: while London to Livorno would attract a premium of around 8–9 per cent in 1620, by the end of the eighteenth century this would typically be less than 2 per cent.
8 Addobbati, Commercio, rischio, guerra, p. 115. It should be noted that this was a long-term trend: premium rates in the short and medium term could fluctuate enormously, not least thanks to endemic maritime warfare.
9 Ceccarelli, Risky Markets, pp. 103–8; Alberto Tenenti and Branislava Tenenti, Il prezzo del rischio: l’assicurazione mediterranea vista da Ragusa: 1563–1591 (Rome: Jouvence, 1985), pp. 243–316; Christopher Kingston, ‘America 1720–1820: war and organization’, in Adrian Leonard (ed.), Marine Insurance: Origins and Institutions: 1300–1850 (Basingstoke: Palgrave Macmillan, 2015), 205–26, at pp. 205–6. Nevertheless, the aggregate trend was downwards. Merchants in Livorno – perhaps the most developed European insurance market outside of London and Amsterdam – would have access to insurance at the most competitive prices and would have been at the forefront of this shift.
10 Addobbati, Commercio, rischio, guerra, p. 126. The seventeenth century is thus a period of particular interest for exploring the continued relevance of older instruments.
The eighteenth-century Livornese jurist Ascanio Baldasseroni wrote that underwriters should cover GA, notwithstanding the fact that these could emerge as the result of local rules which did not conform to those in place in the location in which the insurance contract was signed.
11 Baldasseroni, Delle assicurazioni marittime, vol. 1, pp. 208–9. This practice seems to have prevailed operationally in our period, a thing which is to be expected given the Livorno market’s particular dependence on foreign demand. Early modern merchants would frequently ask their correspondents in foreign centres to buy them insurance and re-insurance abroad, and the Livorno piazza, in particular, depended on this for its vitality.
12 Addobbati, Commercio, rischio, guerra, pp. 127–8. It should be noted, however, that this was officially prohibited in many centres. See Piccinno, ‘Early development of marine insurance’, p. 40. Three connected cases preserved in the
Consoli from the 1660s, concerning the insuring of cargo aboard the annual Dutch fleet coming from Izmir to Amsterdam, show that absorbing a GA emerging from a competent and recognised authority was a perfectly normal state of affairs, even when GA procedures differed from those employed in Tuscany.
13 ASP, CM, AC, 314-14 (27 March 1669); ASP, CM, AC, 314-15 (27 March 1669); ASP, CM, AC, 314-16 (27 March 1669). The cases had been brought in 1669 by Mattus D’Attigian, whose insurers had been slow in paying out. In 1664, ‘Chealam de Nourval’ or ‘Chealam de Norvilli’ of Amsterdam had asked D’Attigian, his correspondent in Livorno, to insure some silk, mohair yarn, and ‘other merchandise’ for him worth a total of 3,500 pieces. The cargo had been loaded on three different ships and D’Attigian had taken out three insurance policies with the same six Livornese underwriters. The Dutch fleet had in fact already left Izmir at the time of drafting the insurance contract, which was to be valid from the moment the fleet left Livorno, a scheduled stop, until its safe arrival in Amsterdam. Norvilli was probably thus responding to the looming threat of the Second Anglo-Dutch War, either by buying himself emergency coverage which he had not originally envisaged needing or by insuring the section of the journey which he deemed far riskier. Perhaps rapidly rising premium rates on the Amsterdam piazza with the news of war had encouraged him to look elsewhere for his coverage.
His intuition was clearly not misplaced, for the fleet was trapped in the port of Cadiz for eight months by the English and was then forced to take a circuitous route home round the west of Ireland and northern Scotland, occasioning further misadventures. When the fleet finally arrived in Amsterdam, there were consequently several large GAs to be adjusted by the Dutch Chamber of Insurance and Averages.
14 On the chamber, see Go, ‘The Amsterdam Chamber of Insurance and Average’. These included expenses of wages and subsistence for the crews during the time in Cadiz and the extended journey, and expenses for the sending of messages to the States General. One of the ships, the
Giustizia, had had to take refuge in the estuary of the Elbe, scraping its hull in the process and having to hire small boats in which to take its cargo the last stage of the journey to Amsterdam. The
Susanna had had to cut its mast and anchor ropes in a storm, and also had to use small boats in order to transport the cargo on the final stretch.
15 ASP, CM, AC, 314-16 (27 March 1669), Amsterdam report; ASP, CM, AC, 314-15 (27 March 1669), Amsterdam report. The two ships, the
Susanna’s mast and ropes aside, were thus claiming identical GAs. In the case of the
Giustizia, however, the damages were repartitioned over cargo, ship, and freight; in the case of the
Susanna the expenses incurred during the blockade were likewise partitioned over cargo, ship, and freight, but the expenses of the extended journey and the freighting of the small boats were partitioned over only cargo and freight, with the freight standing ‘in place of the ship’.
16 ASP, CM, AC, 314-15 (27 March 1669), Amsterdam report. It was apparently the normal custom in Amsterdam that either ship or freight should contribute, but not both; and it is not explained in the documentation why this should only have been followed in one case and not adhered to in the other.
17 Go, ‘GA adjustments in Amsterdam’, p. 401. This was also apparently the case in England in the sixteenth century, with the rationale being that the freight was not earned until the end of the voyage; see Rossi, Insurance in Elizabethan England, p. 138. The difference was probably due to clauses written into the freight contracts themselves. Both customs were at variance with the one in Tuscany, where half of the ship and a third of the freight contributed in all cases. This presented no problem to the
Consoli, however, who ratified D’Attigian’s request for reimbursement in just two weeks. Such swift expedition was not carried out on faith: D’Attigian had to produce an attestation produced by the Dutch Chamber, detailing the voyage, judgement, and GA calculation, translated into Italian and further countersigned by three Amsterdam notaries, but it was nevertheless clearly an entirely unremarkable case from a juridical point of view.
18 ASP, CM, AC, 314-15 (27 March 1669), Amsterdam report. The variance in GA procedure was never mentioned and the reluctant underwriters did not even bother to object.
It must be acknowledged that the example presented here concerns a very slight variant in GA procedures, which had little impact on the overall contribution rate: it was undeniable that these costs would have been accepted as GA in Livorno, and perhaps a more egregious departure from the GA principle would have occasioned objection. Nevertheless, the idea that GA costs were generally accepted unproblematically by underwriters is concordant both with what we have already seen regarding GA payments and with the findings of existing studies of pre-modern insurance markets. Giovanni Ceccarelli argues those pre-modern markets which managed to gain and maintain a position of international preeminence did so not so much through offering competitive premiums, but rather by increasing certainty for the purchasers of insurance, notably by increasing the certainty of a pay-out in the event of a disaster.
19 Ceccarelli, Risky Markets, pp. 242–6. See also Addobbati, Commercio, rischio, guerra, p. 128. There was thus a strong incentive for authorities that sought to regulate that market, like the
Consoli, to mandate the acceptance of GA claims adjusted abroad even if these followed slightly different rules. The position of the Livorno insurance market, more dependent than most on foreign demand, would have been seriously affected had underwriters objected to paying out for GA. This willingness to reimburse Average payments made under different rules was, moreover, a reflection of what was happening with GA itself, with the rules of the port where the adjustment was made determining the contribution to be made by the receivers in all subsequent destinations. As we saw in the previous chapter, an international system could only function if such discrepancies were accepted, and uniformity could certainly not be imposed unilaterally.
While the default position may have been that insurance contracts covered GA payments, this was not always the case. Stipulations could be inserted into the contracts which freed the underwriter from responsibility for Average, the so-called ‘free from Average’ clauses (‘
franchi di avaria’). This sometimes meant that a contract could be free from Average altogether (‘
franchi di ogni avaria’), making the underwriter liable only for total loss. Such clauses are sometimes found among eighteenth-century Tuscan contracts, and this form was the standard one adopted in Venice.
20 Addobbati, Commercio, rischio, guerra, pp. 133–4; Maria Fusaro, ‘Sharing risks, on averages and why they matter’, in Maria Fusaro, Andrea Addobbati, and Luisa Piccinno (eds), General Average and Risk Management in Medieval and Early Modern Maritime Business (Cham: Springer, 2023), 3–31, at p. 12; Baldasseroni, Delle assicurazioni marittime, vol. 1, p. 207; Nehlsen-von Stryk, L’assicurazione marittima a Venezia, pp. 216–44. At other times, however, the clause could indicate that Averages were excluded only up to a certain low percentage: the rationale here was protecting underwriters against very small claims for everyday wear and tear.
21 Targa, Ponderationi, p. 128. As we have seen, ‘
avaria’ itself could mean a number of different things, so it is no surprise that the precise significance of the ‘free from Average’ clause could vary from jurisdiction to jurisdiction and from policy to policy depending on the precise contractual obligations outlined.
22 The confusion continued to generate problems even for contemporaries; see Baldasseroni, Delle assicurazioni marittime, vol. 1, pp. 179–90. Interpreting the significance of these clauses and the weight of Averages upon the insurer is thus not straightforward.