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2017 | OriginalPaper | Buchkapitel

2. Markets and Insurance Company Investments, 1700–1900

verfasst von : Nigel Edward Morecroft

Erschienen in: The Origins of Asset Management from 1700 to 1960

Verlag: Springer International Publishing

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Abstract

After 1700, financial markets in Britain developed rapidly in terms of borrowing and saving. Borrowing, underpinned by a stable financial system, was built around the Bank of England and a reliable government bond market, particularly after 1752 with the introduction of a risk-free asset. After the South Sea Bubble crisis, two insurance companies, the Royal Exchange and London Assurance, thrived. Life assurance subsequently developed rapidly with the Equitable, Scottish Widows, Standard Life and actuaries (William Morgan, A.H. Bailey) became increasingly influential. Insurance companies helped money and government bond markets to develop in the eighteenth century and securities markets (corporate debt and international securities) in the nineteenth. They funded developments such as the Bridgewater Canal, Regent Street (retail) and Belgravia (residential). Insurance companies were the first institutional investors.

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Vorheriges Kapitel Introduction and Overview

Nächstes Kapitel Philip Rose and the First Investment Company, 1868–1883

‘Mortgage’ tends to be a general term covering more than one aspect of lending. The specific meaning in the eighteenth century referred to lending against the freehold land of country estates. But in the nineteenth century, the terms mortgages had much wider application and the words ‘mortgages’ and ‘loans’ became interchangeable until 1870 when they were required to be separately classified.

The Bank of England had a banking monopoly and was effectively a metropolitan London bank. Local country banks became established but these were often small-scale family firms. By contrast, banking in Scotland was much more flexible and effective. The Bubble Act was repealed in 1825 largely because approximately 300 private banks had failed in the 30 years prior.

Ron Harris, Industrializing English Law (Cambridge University Press 2000) 67/68.

‘Chartered’ means the English Crown granted them a royal monopoly; ‘mercantile’ means they had commercial trading operations; ‘joint stock’ means there was equity-funding, transferable stock and ownership rights.

Ron Harris, Industrializing English Law (Cambridge University Press 2000) 25.

Nick Robins, The Corporation That Changed the World (Pluto Press 2012) 29.

GJ Bryant, Asymmetric Warfare (Journal of Economic History 68/2, 2004).

The South Sea Company and the East India Company were both wound up in the 1850s. This coincided with legislation in Britain which effectively changed the characteristics of commercial and financial businesses ushering in the limited liability company as the main corporate structure.

Ron Harris, Industrializing English Law (Cambridge University Press 2000) 57.

Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations (Wordsworth 2012) 628.

In the War of the Spanish Succession which lasted from 1701 to 1714 England, Holland and Austria waged war against France and Spain with much of the conflict in and around the Iberian Peninsula.

PGM Dickson, The Financial Revolution in England (Macmillan 1993) 48.

John Giuseppi, The Bank of England (Evans 1966) 42.

Ron Harris, Industrializing English Law (Cambridge University Press 2000) 63.

Bryan Taylor, Complete Histories, The South Seas Company, The Forgotten ETF (www.globalfinancialdata.com, website accessed on 14 May 2016). Taylor describes the South Sea Company after 1732 as the first Exchange Traded Fund because its dividends and profits were entirely based on the income from its government bond portfolio.

Ron Harris, Industrializing English Law (Cambridge University Press 2000) 57.

Bryan Taylor, Complete Histories, The South Seas Company, The Forgotten ETF (www.globalfinancialdata.com, website accessed on 14 May 2016).

PGM Dickson, The Financial Revolution in England (Macmillan 1993) 44.

PGM Dickson, The Financial Revolution in England (Macmillan 1993) 48.

The English monarch regularly invested in Joint Stock Companies. This was partly to make a profit, hopefully, but recognition also that these organisations had a foreign policy role that was much broader than commerce. Their activities encompassed building and maintaining forts, supporting foreign embassies and paying for Royal Navy protection, for example.

J. Lawrence Broz & Richard. Grossman, Paying for the privilege: the political economy of the Bank of England charters, 1694–1844 (Explorations in Economic History 41/1, 2002).

John Giuseppi, The Bank of England (Evans 1966) 11.

Helen Macfarlane & Paul Mortimer-Lee, Inflation Over 300 years (Bank of England Quarterly Bulletin, May 1994). Note that foodstuff accounted for most of the inflationary basket of goods in the seventeenth and eighteenth centuries so in turn these items could have been sensitive to particular shortages or a failure of the grain harvest for example thus creating sporadic inflation.

Ron Harris, Industrializing English Law (Cambridge University Press 2000) 56.

AH John, Insurance Investment and the London Money Market of the Eighteenth Century (Economica Vol 20, May 1953).

Perry Gauci, Emporium of the World: The Merchants of London 1660–1800 (Hambledon Continuum 2007) 158.

AH John, Insurance Investment and the London Money Market of the Eighteenth Century (Economica Vol 20, May 1953).

Clive Trebilcock, Phoenix Assurance and the Development of British Insurance: Vol 1, 1782–1870 (Cambridge University Press 1985) 620.

Gary Shea, (Re)financing the Slave Trade with the Royal African Company in the Boom Markets of 1720 (Centre for Dynamic Macroeconomic Analysis, 11/14, October 2011).

Harold Raynes, A History of British Insurance (Pitman 1948) 339.

Ann Carlos, et al, Share Portfolios and Risk Management in the Early Years of Financial Capitalism (Center for Economic Institutions, September 2012). The voting hurdles at the East India Company were similar to the Bank of England: a minimum shareholding of £500 was required to have a (one) vote and £2,000 to be considered eligible for a directorship; £4,000 to be a potential Governor. Also see Robin, The Corporation That Changed the World (Pluto Press 2012) 27.

Francois Crouzet, The Victorian Economy (Routledge 2005) 329.

Mae Baker and Michael Collins, The Asset Composition of British Life Insurance Firms, 1900–1965 (Financial History Review 10, 2003). Baker and Collins calculated that 3% was invested in ordinary shares in 1913 but do not give a comparable figure for holdings of ordinary shares in 1900 given data was not sub-divided in this manner.

The Mercers’ Company (www.mercers.co.uk/700-years-history, website accessed on 24 August 2016).

Chris Lewin, Pensions & Insurance before 1800 (Tuckwell Press 2004) 321.

Practical History of Financial Markets, History of Institutional Investment (Pearson 2004) 5.38.

Maurice Ogborn, The Professional Name of Actuary (Journal of the Institute of Actuaries 82, 1956).

Robin Pearson, Insuring the Industrial Revolution (Ashgate 2004) 341/2.

Barry Supple, The Royal Exchange Assurance: A History of British Insurance 1720–1970 (Cambridge University Press 1970) 5, 309.

Barry Supple, The Royal Exchange Assurance: A History of British Insurance 1720–1970 (Cambridge University Press 1970) 314.

Michael Moss, Standard Life, 1825–2000 (Mainstream 2000) 79, 106.

Michael Moss, Standard Life, 1825–2000 (Mainstream 2000) 73,77.

Geoffrey Clark, Betting on Lives (Manchester University Press 1999) 10.

Barry Supple, The Royal Exchange Assurance (Cambridge University Press 1970).

Perry Gauci, Emporium of the World: The Merchants of London 1660–1800 (Hambledon Continuum 2007) 3. Gauci refers to a cohort of merchants numbering 850 in 1690 rising to 1,250 in 1763. Various sources estimate London’s population to be about 650,000 in the first half of the seventeenth century. So, London was populous but the business and merchant community was very small.

David Kynaston, The City of London, Volume 1: A World on Its Own, 1815 to 1890 (Pimlico 1995) 12.

Perry Gauci, Emporium of the World: The Merchants of London 1660–1800 (Hambledon Continuum 2007) 154.

AH John, Insurance Investment and the London Money Market of the Eighteenth Century (Economica Vol 20, May 1953).

PGM Dickson, The Financial Revolution in England (Macmillan 1993) 399.

AH John, Insurance Investment and the London Money Market of the Eighteenth Century (Economica Vol 20, May 1953).

Jeremy Wormell, National Debt in Britain 1850–1930 Vol 1 (Routledge 1999) xxvii.

Bryan Taylor, Complete Histories, The South Seas Company, The Forgotten ETF (www.globalfinancialdata.com, website accessed on 14 May 2016).

Sally Hills, Ryland Thomas & Nicholas Dimsdale, The UK Recession in Context – What Do Three Centuries of Data Tell Us? (Bank of England Quarterly Bulletin, Q4 2010).

British Banking History Society, A History of English Clearing Banks (www.banking-history.co.uk, website accessed 15 May 2016).

Scottish commercial banks – the Royal Bank, the Bank of Scotland and the British Linen Bank – could issue notes, lend, pay interest and they also had branch networks throughout the country. The Savings Bank movement then started in 1810 with the Reverend Dr. Henry Duncan which made banking available to savers with less than £10 to deposit; this movement blossomed, based on management by Trustees and a mutual ownership structure.

Charles Munn, Historical Context Within Banking, Henry Duncan and the Banks (pdf. presentational material for the Henry Duncan Bicentenary Conference, June 2010) 18–21.

AH John, Insurance Investment and the London Money Market of the Eighteenth Century (Economica Vol 20, May 1953).

AH John, Insurance Investment and the London Money Market of the Eighteenth Century (Economica Vol 20, May 1953). John states that the London Assurance had loans of £356,000 in 1761 but that was the high point and by 1770 the amount of personal loans was virtually negligible.

AH John, Insurance Investment and the London Money Market of the Eighteenth Century (Economica Vol 20, May 1953).

Robin Pearson, Insuring the Industrial Revolution (Ashgate 2004) 333.

Clive Trebilcock, Phoenix Assurance and the Development of British Insurance: Vol 1, 1782–1870 (Cambridge University Press 1985) 738.

Barry Supple, The Royal Exchange Assurance: A History of British Insurance 1720–1970 (Cambridge University Press 1970) 313.

Mathew Green, Revolutionary Road (The Financial Times, 2 October 2015).

AH John, Insurance Investment and the London Money Market of the Eighteenth Century (Economica Vol 20, May 1953).

Barry Supple, The Royal Exchange Assurance: A History of British Insurance 1720–1970 (Cambridge University Press 1970) 317.

George May, The Investment of Life Assurance Funds (Journal of the Institute of Actuaries 46/2, 1912).

Prior to the Life Assurance Act 1870, insurance companies did not need to distinguish between ‘loans’ and ‘mortgages’.

Robin Pearson, Insuring the Industrial Revolution (Ashgate 2004) 340.

Clive Trebilcock, Phoenix Assurance and the Development of British Insurance: Vol 1, 1782–1870 (Cambridge University Press 1985) 648.

AH John, Insurance Investment and the London Money Market of the Eighteenth Century (Economica Vol 20, May 1953).

Michael Moss, Standard Life, 1825–2000 (Mainstream 2000) 78.

Barry Supple, The Royal Exchange Assurance: A History of British Insurance 1720–1970 (Cambridge University Press 1970) 327.

George May, The Investment of Life Assurance Funds (Journal of the Institute of Actuaries 46/2, 1912).

Maurice Ogborn, Equitable Assurances, The story of life assurance in the experience of The Equitable Life Assurance Society 1762 to 1962 (Routledge 1962) 243.

Graeme Acheson et al, Who financed the expansion of the equity market? Shareholder clienteles in Victorian Britain (QUCEH Working Paper 2015-07, October 2015).

Harold Raynes, Insurance Companies’ Investments (Pitman 1935) 127.

Ranald Michie, The London and New York Stock Exchanges (Allen & Unwin 1987) 52.

John Newlands, Put Not Your Trust in Money (Association of Investment Trust Companies 1997) 103.

Practical History of Financial Markets, History of Institutional Investment (Pearson 2004) 5/48.

Chris Lewin, Pensions & Insurance before 1800 (Tuckwell Press 2004) 426.

Maurice Ogborn, The Professional Name of Actuary (Journal of the Institute of Actuaries 82, 1956).

AH John, Insurance Investment and the London Money Market of the Eighteenth Century (Economica Vol 20, May 1953).

AH Bailey, Principles on Which the Funds of Life Assurance Societies Should Be Invested (Assurance Magazine X, 1861).

The last principle is incongruous and is more business related, so not really an investment principle in the sense of framing investment beliefs. I think it means that profits from life assurance should be applied only to the life assurance business and not used to cross-subsidise other business activities associated with general insurance, for example.

Bailey’s investment ideas were treated with great reverence and deference by many of his actuarial colleagues and his principles were referred to as ‘Bailey’s canons’.

Barry Supple, The Royal Exchange Assurance: A History of British Insurance 1720–1970 (Cambridge University Press 1970) 332/333.

Dorian Mormont, Performance and Analysis of the Oldest Mutual Fund, the Scottish Widows Fund from 1815 to 2000 (PhD, ULB Solvay Brussels School, 2012).

W. Palin Elderton, Investments a Hundred Years Ago (Journal of the Institute of Actuaries Vol 51, April 1918) & Barry Supple, The Royal Exchange Assurance: A History of British Insurance 1720–1970 (Cambridge University Press 1970) 315.

Sally Hills et al, The UK Recession in Context – What Do Three Centuries of Data Tell Us? (Bank of England, Quarterly Bulletin, Quarter 4 2010).

Practical History of Financial Markets, History of Institutional Investment (Pearson 2004) 4/49.

Barry Supple, The Royal Exchange Assurance: A History of British Insurance 1720–1970 (Cambridge University Press 1970) 335.

Clive Trebilcock, Phoenix Assurance and the Development of British Insurance: Vol 1, 1782–1870 (Cambridge University Press 1985) 524. The legal structure of the Pelican was an ‘extended partnership with unlimited liability’.

Clive Trebilcock, Phoenix Assurance and the Development of British Insurance: Vol 1, 1782–1870, 1782 to 1870, Vol 1 (Cambridge University Press 1985) 752.

100

George Hurren, Phoenix Renascent (Phoenix Assurance 1973) 39.

101

Clive Trebilcock, Phoenix Assurance and the Development of British Insurance: Vol 1, 1782–1870 (Cambridge University Press 1985) 747 & 607.

102

George Hurren, Phoenix Renascent (Phoenix Assurance 1973) 32.

103

Clive Trebilcock, Phoenix Assurance and the Development of British Insurance: Vol 1, 1782–1870 (Cambridge University Press 1985) 523.

104

Clive Trebilcock, Phoenix Assurance and the Development of British Insurance: Vol 1, 1782–1870 (Cambridge University Press 1985) 531.

105

Clive Trebilcock, Phoenix Assurance and the Development of British Insurance: Vol 1, 1782–1870 (Cambridge University Press 1985) 631.

106

Clive Trebilcock, Phoenix Assurance and the Development of British Insurance: Vol 1, 1782–1870 (Cambridge University Press 1985) 636/7.

107

Clive Trebilcock, Phoenix Assurance and the Development of British Insurance: Vol 1, 1782–1870 (Cambridge University Press 1985) 633–652.

108

Phoenix Renascent, George Hurren (Phoenix Assurance 1973) 65.

109

Clive Trebilcock, Phoenix Assurance and the Development of British Insurance: Vol 1, 1782–1870 (Cambridge University Press 1985) 648.

110

George Hurren, Phoenix Renascent (Phoenix Assurance 1973) 65.

111

Clive Trebilcock, Phoenix Assurance and the Development of British Insurance: Vol 1, 1782–1870 (Cambridge University Press 1985) 645.

Geoffrey Clark, Betting on Lives (Manchester University Press, 1999)

Francois Crouzet, The Victorian Economy (Routledge 2005)

PGM Dickson, The Financial Revolution in England (Macmillan 1993)

Perry Gauci, Emporium of the World: The Merchants of London 1660–1800 (Hambledon Continuum 2007)

John Giuseppi, The Bank of England (Evans 1966)

Ron Harris, Industrializing English Law (Cambridge University Press 2000)

George Hurren, Phoenix Renascent (Phoenix Assurance 1973)

David Kynaston, The City of London, Volume 1: A World on Its Own, 1815 to 1890 (Pimlico 1995)

Chris Lewin, Pensions & Insurance Before 1800 (Tuckwell Press 2004)

Ranald Michie, The London and New York Stock Exchanges (Allen & Unwin 1987)

Michael Moss, Standard Life, 1825–2000 (Mainstream 2000)

John Newlands, Put Not Your Trust in Money (Association of Investment Trust Companies 1997)

Maurice Ogborn, Equitable Assurances, The Story of Life Assurance in the Experience of Equitable Life Assurance Society 1762 to 1962 (Routledge 1962)

Robin Pearson, Insuring the Industrial Revolution (Ashgate 2004)

Harold Raynes, A History of British Insurance (Pitman 1948)

Harold Raynes, Insurance Companies’ Investments (Pitman 1935)

Nick Robins, The Corporation That Changed the World (Pluto Press 2012)

Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, ed. Tom Griffith (Wordsworth 2012)

Barry Supple, Introduction, in The Historian and the Business of Insurance, ed. Oliver Westall (Manchester University Press 1984)

Barry Supple, The Royal Exchange Assurance: A History of British Insurance 1720–1970 (Cambridge University Press 1970)

Clive Trebilcock, Phoenix Assurance and the Development of British Insurance: Vol 1, 1782–1870 (Cambridge University Press 1985)

Jeremy Wormell, National Debt in Britain 1850–1930 Vol 1 (Routledge 1999)

Graeme Acheson, Gareth Campbell & John Turner, Who Financed the Expansion of the Equity Market? Shareholder Clienteles in Victorian Britain (QUCEH Working Paper, 2015-07 October 2015)

AH Bailey, Principles on Which the Funds of Life Assurance Societies Should Be Invested (Assurance Magazine X 1861)

Mae Baker and Michael Collins, The Asset Composition of British Life Insurance Firms, 1900–1965 (Financial History Review 10, 2003)

British Banking History Society, A History of English Clearing Banks (www.banking-history.co.uk)

J. Lawrence Broz and Richard Grossman, Paying for the Privilege: The Political Economy of the Bank of England Charters, 1694–1844 (Explorations in Economic History 41/1, 2002)

GJ Bryant, Asymmetric Warfare (Journal of Economic History 68/2, 2004)

Ann Carlos, Erin Fletcher and Larry Neal, Share Portfolios and Risk Management in the Early Years of Financial Capitalism (Center for Economic Institutions September 2012)

Mathew Green, Revolutionary Road (The Financial Times, 2 October 2015)

Sally Hills, Ryland Thomas and Nicholas Dimsdale, The UK Recession in Context – What Do Three Centuries of Data Tell Us? (Bank of England, Quarterly Bulletin, Quarter 4 2010)

AH John, Insurance Investment and the London Money Market of the Eighteenth Century (Economica Vol 20, May 1953)

Helen Macfarlane and Paul Mortimer-Lee, Inflation Over 300 years (Bank of England Quarterly Bulletin, May 1994)

George May, The Investment of Life Assurance Funds (Journal of the Institute of Actuaries 46/2, 1912)

The Mercers’ Company (www.mercers.co.uk/700-years-history)

Dorian Mormont, Performance and Analysis of the Oldest Mutual Fund, the Scottish Widows Fund from 1815 to 2000 (PhD, ULB Solvay Brussels School, 2012)

Charles Munn, Historical Context Within Banking, Henry Duncan and the Banks (pdf. presentational material for the Henry Duncan Bicentenary Conference, June 2010)

Maurice Ogborn, The Professional Name of Actuary (Journal of the Institute of Actuaries 82, 1956)

W. Palin Elderton, Investments a Hundred Years Ago (Journal of the Institute of Actuaries 51, April 1918)

Practical History of Financial Markets (Pearson 2004)

Gary Shea, (Re) financing the Slave Trade with the Royal African Company in the Boom Markets of 1720 (Centre for Dynamic Macroeconomic Analysis 11/14, October 2011)

Bryan Taylor, Complete Histories, The South Seas Company, The Forgotten ETF (www.globalfinancialdata.com)

Titel: Markets and Insurance Company Investments, 1700–1900
verfasst von: Nigel Edward Morecroft
Verlag: Springer International Publishing
Buch: The Origins of Asset Management from 1700 to 1960
Print ISBN: 978-3-319-51849-7

Electronic ISBN: 978-3-319-51850-3

Copyright-Jahr: 2017
DOI: https://doi.org/10.1007/978-3-319-51850-3_2

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