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Underwriters of the United States

Underwriters of the United States Summary

Deeply and imaginatively researched, Underwriters of the United States uses marine insurers to reveal a startlingly original story of risk, money, and power in the founding era

Underwriters of the United States: How Insurance Shaped the American Founding (Published by the Omohundro Institute of Early American History and Culture and the University of North Carolina Press)

Unassuming but formidable, American maritime insurers used their position at the pinnacle of global trade to shape the new nation. The international information they gathered and the capital they generated enabled them to play central roles in state building and economic development.

During the Revolution, they helped the U.S. negotiate foreign loans, sell state debts, and establish a single national bank. Afterward, they increased their influence by lending money to the federal government and to its citizens. Even as federal and state governments began to encroach on their domain, maritime insurers adapted, preserving their autonomy and authority through extensive involvement in the formation of commercial law.

Leveraging their claims to unmatched expertise, they operated free from government interference while simultaneously embedding themselves into the nation's institutional fabric. By the early nineteenth century, insurers were no longer just risk assessors. They were nation builders and market makers.

About the Author

Hannah Farber, an assistant professor of history at Columbia University, specializes in the political economy of colonial North America, the early American republic, and the Atlantic World. Additional research interests include early modern globalization and the visual and material culture of ocean commerce.

Underwriters of the United States Introduction

Excerpt. © Reprinted by permission. All rights reserved.

At first glance, the events of the preceding pages seem like a straightforward business story. A merchant buys an insurance policy, undertakes a voyage, suffers losses, and receives indemnification. What significance can we ascribe to these incidents? One reasonable approach would be to view our insurance-buying Bostonian as a dutiful heir to New England’s long-established maritime traditions.

He trafficked, after all, in the goods his region’s economy had depended on since long before the independence of the United States—fish, barrel staves, grain, slave-grown sugar. Alternatively, we might assess our Boston merchant in light of his activities on land. Here, he seems more forward-looking: like a protobusinessman, perhaps, whose successful visit to a city insurance office presages the emerging nineteenth-century world of corporations and capitalists, clerks and accountants, banks and money, finance, risk, and debt.1

If we look still more closely at the Boston merchant’s tale, however, a third story comes into view. It is a story about events that could have taken place only where and when they did—in American port cities, right at the water’s edge, during the first few decades after the establishment of the United States. This third story is about how the old business of marine insurance became suddenly and deeply involved in the new business of American state making.

The clues that reveal this third story are almost comically humdrum: a brand-new insurance company renting office space from a bank, also newly established; a chartered corporation with a few state legislators sitting on its board; a friend in hot water with a foreign government; an obscure law book sitting on a secretary’s desk. But if we examine the connections among all of these things, we can take better measure of an unusual business that, for a time, had extraordinary power to shape the course of events.

In short, during the American Revolutionary War and the first eventful decades thereafter, as Americans hashed out the meaning of citizenship and put theories of governance into practice, as revolutions tore apart the empires of the Atlantic world and war raged across the oceans, marine insurers underwrote the establishment of the United States.2

In the eighteenth century, “underwriting” could mean a few different things. It could mean subscribing one’s name to an insurance policy that covered a certain piece of property, thereby accepting, for a price known as the “premium,” the risk of that property’s loss. “Underwriting” could also mean serving as the guarantor for a loan or committing funds to a certain purpose. As will explain in greater detail, both of these practices resembled insurance underwriting in that they involved placing one’s resources at the disposal of others for a specific undertaking, with the explicit or implicit understanding that the undertaking might fail.3

Wherever underwriting was an established financial practice, the term “underwriting” gained cultural purchase and began to signify a more general application of one’s resources. People used “underwriting” to mean expressing support for an idea or placing their personal reputation behind a project. These definitions, too, are part of the story told in this book. Its claim that marine insurers underwrote the United States is not only about actions taken in the realm of finance but also about the engagement of a more extensive set of resources in a state-making project that was as much cultural and political as it was economic.

Marine insurers first underwrote the United States simply and straightforwardly by shouldering the financial risks of the war for American independence, the subject of. Port town insurance brokers sold policies, for example, to the owners of American privateer vessels that set out to prey on the British merchant fleet.

When the privateers suffered losses, their underwriters, who were typically fellow merchants, indemnified them. When privateers captured and sold British property, they could use the money to buy more insurance, and local merchant-insurers profited. In addition, as observers of the war were quick to note, successful American captures caused politically embarrassing spikes in Britons’ own insurance rates. Thus, in several ways, the resources of American marine insurers supported the independence project.

Although the Revolutionary War did not fundamentally change the nature of the American marine insurance business, the national financial infrastructure that emerged from the war bore the mark of underwriters’ logic. Philadelphia merchant-underwriter Robert Morris, who famously placed his personal resources behind the independence project, simultaneously brokered foreign loans, sold state debt, and created the Bank of North America.

In this fashion, he established the mechanisms through which capital-holding individuals would take the risks of independence and its economically uncertain aftermath. Since these mechanisms required merchant experts to manage them, Morris’s wartime undertakings should be understood to include not only the establishment of home rule but the determination of who should rule at home. Morris is most commonly described as a “financier” of the United States, but the designation of “underwriter,” in the early modern sense of subscriber, supporter, or guarantor, suits him equally well.

The constitutional establishment of the United States transformed the marine insurance business by inspiring corporate constitution making. From the mid-1790s through the War of 1812, Americans formed scores of insurance companies. They incorporated them by petitioning their states for formal charters in a process that was closer akin to the era’s political constitution making than is generally recognized.

Corporate constitution making was also, however, a risk-management process that enabled companies to share financial risks with their host states, the public, and the federal polity in new ways. For insurance companies, which specialized in risk management, this process bore particular significance. When the first American joint-stock insurance company requested a charter from the state of Pennsylvania, critics raised important questions about the relationship between organized commercial wealth and the state.

But the company’s successful charter, which catalyzed the chartering of many other corporations, was in itself a consequential answer. Insurance companies, winning charters en masse, moved to the forefront of American merchant communities. Collaborating closely with one another, they made it possible for American merchants to take on a new, symbiotic risk relationship with state and federal governments without losing their ability to act autonomously.

State-chartered insurance companies underwrote the United States, in the broader sense of the word, by lending it the sizable stores of capital that they accrued in a very short period of time. Far wealthier and more numerous than their place in historical memory would suggest, insurance corporations invested large portions of their capital in the securities issued by the United States.

By purchasing so much American debt, as we will see in Chapter 4, insurance companies took on the state’s risk, reaping both short- and long-term rewards. In the process, they reshaped the American financial landscape. They also bound themselves closely to American banks, bolstering the financial sector and allowing it to produce more wealth for the state.

Meanwhile, they engaged in a cultural initiative to offset the political risk of popular antipathy toward their wealthy and exclusive corporations. Sending delegations to urban parades, bestowing expensive silver gifts on valiant sea captains, and commissioning portraits of themselves in culturally meaningful poses, insurers invested in their own future by weaving themselves into the fabric of American society.

This strategy yielded significant profits to company leaders and shareholders, but American underwriters were not only out for themselves. They could not be, because they were financially invested in the success of the new republic. It was therefore in their best interest to secure American prosperity by, say, publicly pronouncing the country successful, its institutions prosperous, and its trade secure. As insurers’ wealth and influence grew, their expressed confidence in the nation’s future helped summon that future into reality.

So far, so straightforward. But marine insurance was not as purely patriotic a business as it liked to appear. In its bones, as Chapter 1 explains, it was a transnational practice, not an American one. It had taken its modern form in Renaissance Italian city-states to facilitate the transportation of valuable goods among far-flung parties and across inconvenient political boundaries.

Buying and selling in a fragmented landscape drew merchants and their insurers into domains of political and legal uncertainty, which generated financial hazards but also significant opportunities. When city-states or empires went to war, for example, trade became riskier, but merchants were willing to engage in physically dangerous, illegal, or quasi-legal voyages, and insurers were willing to underwrite them, because they offered the possibility of particularly large profits. The polity’s peril was the insurer’s gain, because it was the risk of losses to foreign powers, or of administrative inconveniences during wartime, that spurred merchants to buy expensive insurance in the first place.

On the most fundamental level, insurance was in tension with the state because insurance functioned in its own right as a form of governance—one that allowed merchants to control each other’s behavior through the strategic deployment of capital, technical expertise, mythology, and statecraft. Insurance was a central topic of the purportedly transnational and eternal lex mercatoria, the “laws of merchants”: a disorderly but revered body of rules, customs, and best practices that many eighteenth-century merchants believed to govern their business; they doggedly defended the autonomy of these so-called laws of merchants even as early modern states consolidated their powers.

During Britain’s imperial wars, insurers brought prosperity to the metropole, but they also profited from, and perpetuated, fundamental tensions between the British Empire and the semimythological system of merchant self-governance. They frequently used the laws of merchants to justify their ongoing independence from the state, even as they demanded more assistance and accommodations from it. In the context of this tension, the insurance brokerages that formed in British North America during the eighteenth century cannot be read simply as evidence of economic development on the empire’s periphery. They must be additionally understood as new infrastructure for a kind of merchant self-governance that owed no inherent loyalty to Britain—nor to the local leadership of its North American colonies.

Our fictional merchant, like any other American who bought marine insurance in the year 1800, inherited these tensions, for he, too, was subject to two distinct forms of governance. He was a citizen of the new United States—though it was not yet entirely clear what this meant—and as such, he was subject to laws of his fellow citizens’ making. But he was also, by necessity, subject to the laws of merchants, which determined when and in what circumstances he would be indemnified. These latter were upheld, in theory and largely in practice, by his insurers.

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Product details:

EditionInternational Edition
ISBN1469663635, 978-1469663630
Posted onNovember 23, 2021
Page Count352 pages
AuthorHannah Farber

Underwriters of the United States PDF Free Download - HUB PDF

Deeply and imaginatively researched, Underwriters of the United States uses marine insurers to reveal a startlingly original story of risk, money, and power in the founding era

URL: https://amzn.to/3y2zJZA

Author: Hannah Farber

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