Marine cargo insurance is as old as marine trade and has existed in various forms dating back to 3000 BC. Early merchants trading on China's rivers practiced a form of loss control by deliberately spreading a given cargo among several vessels, thereby reducing the potential loss.

It is in the ancient civilization of Babylon, however, that we find the earliest record of insurance in the form of "bottomry." The Code of Hammurabi (c. 2100 BC) sets bottomry (the advance of money on the security of a vessel to protect against the loss of the cargo by marine perils) at 20 percent. Traders, whose cargoes were advanced by merchants, were thus protected from debt in the event that the cargo was lost. This practice continued throughout the Mediterranean region and was further emphasized in an edict by the Roman Emperor Justinian, who restricted the interest money advanced to bottomry to 12 percent.

Another marine insurance term found in ancient time is General Average. The Greek Indian and Phoenician traders are known to have used the concept, and a written reference to it is made in Rhodian Law (c. 700 BC). The law states, "Let that which has been jettisoned on behalf of all be restored by the contribution of all." It continues, "A collection of the contributions for jettison shall be made when the ship is saved."

Justinian also codifies the concept of General Average, taking it a step further to include the following: "When a ship is sunk or wrecked, whatever of his property each owner may have saved, he shall keep it for himself." This concept was widely used throughout early civilizations.

The next major development in marine insurance can be traced to the rise of the guilds throughout Europe in the 11th and 12th centuries. Danish navigators began forming guilds whose role was to indemnify its members against losses at sea.

The same era also finds the first use of premiums in marine insurance. The merchant cities of Lombardy, Venice and Florence were the centers of Mediterranean trade and it was here that written records began to emerge. By 1255, the Merchant State of Venice had embodied the principals of mutual insurance against the loss of pillage through contribution.

The oldest marine policy known to have been issued was on a vessel named Santa Clara, and the oldest policy document in existence was dated April 24, 1384, covering four bales of textiles on a journey from Pisa to Savona.

The Lombards brought these basic concepts of marine insurance to northern Europe and England in the 13th Century. By the 17th Century, London, with the emergence of the Lloyd's of London Association, had developed into a leading center for marine insurance.

The well-known Lloyd's of London traces its roots to a coffee shop founded by Samuel Lloyd in 1688 and was favored as a meeting place for the transaction of insurance business among underwriters and merchants. By 1734, the official list of vessels and values known as the "Lloyd's List" was first published. More than 250 years later, it continues to serve as the leading shipping list in the marine insurance industry. In 1769, underwriters took their informal arrangement and founded the organization we know today as Lloyd's of London. Ten years later, the first standard policy wording was developed for use at Lloyd's.

Today, Lloyd's of London is still acknowledged as the largest meeting place for underwriters and shippers to transact marine insurance business. In 1906, the British Parliament enacted the Marine Insurance Act. This legislation continues to influence marine insurance policy wordings and conditions to this day.

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