Insurance: 5,000 years old, still going strong | Other finance on The Gateway

Insurance: 5,000 years old, still going strong

The industry's fascinating origins and where it stands today

The insurance industry escaped the financial crisis relatively unscathed and continues to grow, including by increasing its graduate workforce. And London continues to be an important centre for this increasingly global industry.

What has made and makes the insurance business so essential in the business world and beyond and so resilient, particularly in the UK?

Once upon a time in China...

Insurance has come a long way since its origins in ancient China. A form of insurance first became popular around 3000 BC among Chinese merchants who wanted to ensure they'd see a profit from the goods they shipped overseas.

If the ship went down at sea or ran into pirates, an insurer would reimburse the owners of the ship and goods with the value they had lost. To pay for the loss, the merchant would be sold into slavery to the insurer until the debt was repaid.

The Chinese had started something. Before long the Greeks, Hindus and Romans also had similar concepts in place, each society modifying the original concept with their own takes on the idea.

Here and now

Today, insurance has become one of the largest industries in the UK. According to the ABI (Association of British Insurers), the UK insurance industry is the third largest in the world and the largest in Europe.

It's an essential part of the UK's economy that manages investments worth £1.8 trillion, equivalent to around 25 per cent of the UK's total net worth.

The insurance industry employs around 320,000 people in the UK and it's one of the country's major exporters, with 26 per cent of its income coming from premiums from overseas business.

What's the secret?

With financial services firms and corporates scrutinising risks more and more closely in recent years, the insurance industry has become an ever more vital component of these worlds.

Insurance is not immune to economic shocks (witness the near collapse and government intervention into American insurance giant AIG), but it's felt that insurers across the globe are well-equipped to deal with the present challenging environment.

An important factor contributing to this strength is the fact that regulatory and capital regimes for insurers have been strengthened in recent years - for example, by the implementation of EU directive Solvency II.

Today the City, tomorrow...

Today, as in the past, the City's insurance landscape is dominated by Lloyd's of London, an insurance market where firms gather to provide specialised, high-end insurance products to large corporates and financial services firms.

After a troubled time in the early 1990s, Lloyd's (the oldest insurance market in the world, growing out of a coffee shop named after its owner, Edward Lloyd, in 1688) has gone from strength to strength in recent years.

And with syndicates at Lloyd's insuring Richard Branson's Virgin Galactic programme, it looks like there's no limit to how far insurance could go in the future...

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