TH: What was the inspiration behind writing this book?
LW: First of all, thank you for inviting me to speak with you! My book is a study of the Parisian marine insurance market under Louis XIV. I focus primarily on two insurance institutions: the Royal Insurance Chamber and the Royal Insurance Company. The book builds on my doctoral thesis, which I wrote within Maria Fusaro’s ERC-funded project on risk management in maritime Eurasia (called AveTransRisk). Going into my research, I truly had no idea what I was going to find. There is very little literature on the marine insurance industry in early modern France, and I had never worked with French archival sources, so going to the archives in Paris for the first time was a real dive into the unknown. Mercifully, the archives had a wealth of extraordinary documents to study, and the handwriting of seventeenth-century French scribes is often far nicer than the handwriting we find in documents from seventeenth-century England!
As I started to sketch the outlines for my chapters, my original goal was to answer the question of why the Chamber and the Company had failed where the insurers of Amsterdam and London had succeeded. Yet the more I delved into the sources, the more I realised this was une question mal posée. In assuming these institutions were failures, I had brought a heap of anachronistic analytical baggage along with me. Doing the institutions justice required treating them as case studies in social, economic, legal, and political life – in effect, case studies in absolutism itself, and all that this entailed for the structuring of Old Regime France under Louis XIV.
The book is not strictly economic history, nor social history, nor political history: it is a combination of the three. This was only possible, however, thanks to the unusually rich and diverse set of sources at my disposal: starting from a core base of institutional registers that had been kindly recommended to me by Giovanni Ceccarelli, I had branched out to study state papers, court records, printed materials, and material culture. This array of sources affords us a unique perspective on seventeenth-century France, global commerce, and marine insurance practice. The Chamber and the Company were based on rue Quincampoix, a narrow street in the heart of Paris – when I am in the city, I often walk past the building that housed the Company’s offices – but I like to say this was a rue with a view, and the book tries to paint the picture of that view.
TH: In the book you argue that the absence of credible commitment was not an inherent impediment to France’s chartered companies. Does your argument challenge the ‘democratic advantage hypothesis’ , the idea that democracies enjoy advantages in the form of higher long-run rates of economic growth, access to international capital etc. and argue that absolutism aided the marine insurance industry in Old Regime France?
LW: I should be clear about what I mean when I say absolutism. The model I propose is one of ‘absolutism as risk management’. Put briefly, I argue that the French state was able to exploit its monopoly on privilege to leverage the resources of its subjects in pursuit of state policy. In the process, it was French subjects rather than the state itself who bore the risks that state policy entailed.
In making this argument, I don’t wish to challenge the democratic advantage hypothesis precisely. Rather, I am unconvinced by neo-institutional arguments that posit a strong difference between France on the one hand and England/Britain and the Dutch Republic on the other hand when it comes to credibly committing to protecting property rights. In his very stimulating book, Going the Distance, Ron Harris argues that England and the Dutch Republic were able to credibly commit to the rights of corporate shareholders in a way that France and other countries were not, which explains why the English and Dutch East India Companies rose to prominence where its European counterparts did not. While there is much I admire about Harris’ book, in this instance, I think his argument reflects broader issues with current discussions of European chartered companies, which have been muddied by imprecise or anachronistic standards in evaluating their success or failure. Works inspired by neo-institutionalism (like Harris’) are clear that these companies were, at heart, intended as profit-making endeavours centred on the shareholder. For me, this is as an assumption that is not borne out by the evidence in France, nor even for England and the Dutch Republic. Indeed, these countries leveraged their famous East India Companies in pursuit of state objectives that went well beyond the bottom line, and in so doing, they proved just as capable of shareholder expropriation as the French.
In presenting my argument on French chartered companies, my book studies the Royal Insurance Company. Established in 1686, this was, to the best of my knowledge, the first chartered company in the history of marine insurance. If we listen to Harris, investors should never have invested in this company in the first place: French chartered companies in prior decades had not made profits, and expropriation was a perennial threat. Yet investors put their money into this company, and many of them also invested in several others around the same time too. These companies were useful to the state as tools in developing French engagement with strategic commercial markets, while investors were exploiting the social, legal, and economic benefits of investment that were entirely detached from shareholder dividends. Leveraging chartered companies in this way was not unique to France, though, so if we wish to have useful discussions about European chartered companies going forward, I think we need to put the profit motive to one side and question our assumptions about the role and expectations of shareholders in this period.
To return to your question, then, I would say that absolutism shaped how the French state approached its interventions into the marine insurance industry. The state’s intention was that the Royal Insurance Company would serve the needs of maritime commerce, and the Company did so successfully. This did not mean it made profits, though. The French navy proved unable to protect colonial commerce or neutral shipping, so it was the Company that was expected to offer protection where the state itself could not. The company bore significant losses so that the wheels of maritime commerce could continue to turn. This was a very different vision for a company and its objectives than we would recognise today. Did absolutism aid the industry? It’s hard to say. The company provided vital wartime coverage, but political oscillations at Versailles meant it was thrown under the bus at the turn of the century. The inconsistency of state support was an ongoing risk for the companies.
TH: I really like the use of the insurance triangle to illustrate the crucial institutional framework behind the insurance industry in Amsterdam and London. What is your perspective on the idea that a confluence of public and private interests helped the insurance industry in Old Regime France? Was this the case of other industries as well?
LW: It’s a really interesting question. So, in laying out my argument, I suggest that there were three interrelated elements needed for an early modern marine insurance market to achieve lasting success: adequate institutions (or, more strictly, organisations defined in the Greifian sense), an adequate capital market and adequate support at the municipal or state level. In proposing this ‘triangle’ – which I fully appreciate is rough around the edges – my goal is to make clear that there was never a silver bullet for success in this period: there were a great many reasons why markets did not take off in the way Amsterdam and London eventually did. On the flipside, there were also multiple paths to success, although I am clear that Amsterdam’s success was premised on strong municipal support, while London’s market was built on a variety of municipal and state interventions. These interventions were not always successful, as Adrian Leonard has demonstrated, but state support in the eighteenth century allowed for the rise to dominance of Lloyd’s of London. In the case of Paris, state support was needed to overcome challenges in gathering information, coordinating capital, and resolving conflicts. Yet state support was uneven throughout Louis XIV’s reign, which ensured that neither the Chamber nor the Company could achieve the sort of lasting success that would allow the Parisian market to challenge Amsterdam and London.
On this basis, I see the relationship between the French state and various groups of merchants, officeholders, and such as decidedly complex. There was a confluence of state (I wouldn’t necessarily say public) and private interests in the institutions I study, at least for certain periods of time, but this confluence was not always harmonious or natural. While core groups of wealthy merchants wielded significant political power in England and the Netherlands, the picture was very different in France, where diverse mercantile communities across the kingdom pulled in many different directions. Pursuing commercial policy under Louis XIV so often required the crown to drag these communities kicking and screaming, with the tools of privilege being deployed where necessary to make state and private interests align. For sure, we see this with marine insurance: when he established the Royal Insurance Company, the marquis de Seignelay assumed that French merchants would seek coverage from the company when local insurance coverage was insufficient. He was deeply perturbed to discover that merchants in several Atlantic ports chose to simply continue securing coverage from Amsterdam. In the end, he banned French subjects from securing insurance coverage abroad. I do not get the impression this ban had any real teeth, but it speaks to this sense that Louis XIV’s ministers felt like they were herding cats sometimes in trying to implement their commercial policies.
We see this to an extent with other industries too. My current postdoctoral project is studying the fine woollen cloth industry of the Languedoc, which became the linchpin in France’s booming trade with the Ottoman Empire in the first half of the eighteenth century. Getting to this point, though, required significant state intervention in the face of producers who, when left to their own devices, could not be trusted to produce cloth according to the high standards demanded by the Ottoman consumer, as well as merchants who were known to try to pass off cheap cloth as higher quality than it actually was. French supremacy in Levantine trade was built on significant state intervention and regulation, and Recent work has demonstrated very convincingly that the dismantling of this system of regulation in the middle of the eighteenth century led to a race to the bottom that was catastrophic for France’s Levantine commerce. There was clearly a confluence of state and private interests in the development of this industry and trade, but for the ministers involved, it must have felt like they were pulling teeth. By Louis XIV’s death, a piece of cloth destined for the Levant had to be inspected three times before it even left France. There were times when Jean-Baptiste Colbert, one of Louis XIV’s leading ministers, questioned whether specific manufacturers or groups of merchants truly understood their own interests. This may seem very strange, but there were times when I think Colbert was entirely justified in asking this question. This is not to say, though, that Colbert and his successors always had a strong grasp on these interests themselves!
TH: In Chapter 1 you argue that merchants did not want to look for insurance coverage abroad and relied on domestic sources. Moreover, you note that French merchants conceived to structure the insurance company so that it resembled closely to that of a bank. What role did Colbert’s policy of propping the insurance industry and exploring local sources of finance, resulted in the financial development of France?
LW: The proposal for a French insurance company in 1664 is fascinating. In effect, Colbert tried to work with the merchants of Rouen to create an insurance company that would have a monopoly over all marine insurance in France. What is more, in an attempt to cut the Dutch out entirely, it was proposed that the French would be forbidden thereafter from securing coverage abroad. These discussions were happening at exactly the same time as the plans were being implemented for the famous East and West India Companies, reflecting the significance of marine insurance within Colbert’s broader strategy for developing maritime commerce through leveraging Parisian capital in particular.
Venal officeholding was at the heart of social political and economic life in Old Regime France, and it is this culture that Colbert strove in vain to transform. Venal officeholders invested money to buy positions in powerful institutions, such as local courts, and then received set payments from the state (known as gages) in exchange. Politically powerful, socially prestigious, and economically lucrative – officeholding was a stepping stone to noble status, which in turn meant valuable tax exemptions – these offices were often an excellent investment with good returns (both economic and otherwise). But how then do you incentivise investment in commerce and industry? It is precisely through institutions like the proposed company in 1664 and the Royal Insurance Chamber, established in 1668, that Colbert experimented to try to entice wealthy officeholders to put their capital behind French commerce. Yet these efforts to create a countrywide capital market that could match up supply (in Paris in particular) with provincial demand proved challenging on a number of levels. I think we will come back to this point again shortly.
TH: In Chapter 3, in what you term as the ‘Parisian problem’ what role did networks play in overcoming information asymmetries and supporting the insurance industry in France?
Chapter 3 acknowledges the elephant in the room, which is that Paris was not the most intuitive location for a marine insurance market. To quote the famous French merchant Jacques Savary, Paris was ‘over thirty leagues from the sea’, which left underwriters in a poor position to properly price risks or assess if they were being presented with legitimate claims. The French state’s solution was to put its own networks of information gathering at the disposal of the insurance market in Paris. Provincial officers, merchants, overseas consuls and colonial officers were all enlisted to provide the shipping information that was needed for successful underwriting. This was a remarkable system, and I do not know of any analogous system of state support for information gathering in the insurance industry before the rise of Lloyd’s of London. This is especially interesting, because the successes of Amsterdam and London are often attributed in large part to their excellent information resources. Through this state support, Paris had excellent information resources too, but this was not a silver bullet: there were a lot of elements that needed to come together to make a successful market.
TH: In Chapter 4, with the Chamber’s returns wiped out, how did the incentive to continue underwriting fare when investments outside commerce proved more stable and lucrative?
Here, we return to the fundamental issues Colbert faced in transforming the economic culture of Old Regime France. The Royal Insurance Chamber operated successfully from 1668 to 1671, attracting a strong group of men and women who offered extensive insurance coverage on voyages throughout the western hemisphere. Elisabeth Hélissant, a Parisian widow, put together a remarkable portfolio in this period, ranging from Veracruz in the west to Syria in the east, from Greenland in the north to Buenos Aires in the south. Yet while underwriters cleaned up during this period of peace, things quickly changed with the outbreak of the Dutch War in 1672. Suddenly, losses skyrocketed, and tried and tested strategies for creating balanced portfolios went out the window. While some entered the market in the hopes of making big profits – and largely failed in doing so – others withdrew entirely. By 1673, it became clear to the majority of the Chamber’s underwriters that the landscape had transformed, and putting together successful portfolios now required a great deal of care and attention. Meanwhile, to finance the French war effort, Colbert was forced to issue new annuities (rentes) on the Hôtel de Ville de Paris – in effect, the royal debt – with interest rates that far outstripped the returns the vast majority of underwriters were making in the Chamber, if they made a profit at all. So, to return to our earlier question, how then do you incentivise investment in commerce and industry? In peacetime, Colbert achieved some success with the Chamber; in war, the Colbertian strategy fell apart. Why risk everything in volatile wartime commerce when returns from annuities and offices were often better and less risky? Unsurprisingly, the vast majority of the Chamber’s underwriters left the market entirely after 1673.
TH: Finally, this book is an important contribution towards understanding an industry that had vast and deep linkages with many other sectors such as shipping, banking, finance, and industry to name a few. What are some implications of the book in understanding insurance institutions today?
LW: This is a very important question. I’m a firm believer that as historians, our work inevitably manifests the historical conjunctures that frame our lives. In our case, we are living in an age where the relationship between economic development, risk management and the state are once again coming to the fore. The interventions of Louis XIV’s ministers into the marine insurance market were premised on their recognition of the instrument’s power in driving the commercial growth of England and the Dutch Republic. Furthermore, at this point in time, French commerce was stuck in what Fernand Braudel calls the ‘straitjacket’ of Dutch shipping. Intervention was necessary because, left to their own devices, French maritime communities alone could not create insurance markets of the scale necessary to seriously challenge those of Amsterdam or London, nor could they transform the commercial dynamics that had tipped the balance of shipping and trade in the favour of the Dutch. While state intervention was not enough for France to become the masters of the European economy as ministers had hoped, British commercial supremacy in the eighteenth century was ultimately built on significant state support and intervention. The question, then, was not of whether to intervene, but rather what types of interventions would work within the institutional frameworks that guided economic activity in this period.
In many ways, I think we are now coming full circle. Lloyd’s of London is clear that even insurers are not yet appreciating just how significantly risks across the world will be changing in the coming years as a result of climate change. Dark clouds sit very ominously on the horizon of the Sunshine State, with increasingly frequent and intense hurricanes precipitating dramatic rises in home insurance premiums that are pushing people out of Florida entirely – and this is a story that will surely become more and more frequent in the years to come, as countries and regions in the greatest need of resources to respond to climate disasters will find themselves increasingly unable to access them. I cannot even begin to wrap my head around the consequences that the widespread collapse of risk into uncertainty would have for our world today. So, whether we like it or not, the systemic transformations that are necessary to respond to the threats of climate change – and thus avoid economic catastrophe – require international cooperation and extensive state intervention. While it was England and France looking to redefine the dynamics of the world-economy of seventeenth-century Europe in response to Dutch supremacy, today it is the USA and the EU who find themselves on the backfoot in the face of Chinese dominance in the procurement, processing and utilisation of the elements needed for the energy transition. Just as climate disruption and political conflict were intimately intertwined in the seventeenth century – Geoffrey Parker, Sam White and others have analysed the remarkable impact of the Little Ice Age across the world – so they look set to be intertwined again in the years to come. Nevertheless, the USA has made a significant step forward with the Inflation Reduction Act; we shall see whether this is simply a false dawn. Let us note, though, that the question is not of whether to intervene, but rather what types of interventions will work within the institutional frameworks that guide economic activity today.
Dr. Lewis Wade is a Marie Skłodowska-Curie Postdoctoral Fellow at Leiden University, as well as an Honorary Research Fellow at the University of Exeter. His thesis, entitled ‘Privilege at a Premium: Insurance, Maritime Law and Political Economy in Early Modern France, 1664-c. 1710’, was awarded the British Commission for Maritime History’s Boydell and Brewer Prize for the best doctoral thesis in maritime history and the Coleman Prize for Best PhD Dissertation in Business History by the Association of Business Historians in 2023.