Hannah Farber On How Insurance Shaped The Development Of The Early United States
Hannah Farber is Associate Professor of History at Columbia University & Author of Underwriters of the United States: How Insurance Shaped the American Founding.
By Aiden Singh, November x, 2025
Professor Hannah Farber.
Introduction
Professor Hannah Farber teaches courses in early American history at Columbia University. Her research focuses on the political economy of colonial North America, the early American republic, and the Atlantic World, with particular attention to how financial practices and commercial networks shaped the development of the United States.
She is the author of Underwriters of the United States: How Insurance Shaped the American Founding (2021), which examines how the transnational system of marine insurance influenced the behavior of American merchants and the formation of early American institutions. Her current project, The American Lawsuit: Civil Litigation from the Revolution to Tocqueville, explores the role of civil litigation in shaping the early republic.
In our conversation, Professor Farber and I discuss the ways financial practices and insurance shaped early America, and the broader lessons her research offers for understanding the insurance industry.
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The Role of Insurance Underwriters
Aiden Singh: When we think about the important figures in the founding of the United States, underwriters don’t typically come to mind. But you’ve argued that they actually played quite a significant part. What role did they play in shaping the early United States?
Hannah Farber: Underwriters were part of the complex business of transnational insurance. It was a very old enterprise, and their networks of expertise and capital supported many of the risks taken by commercial entrepreneurs during the age of revolution.
Much of the warfare in this period involved capturing material goods and commercial vessels as a means of weakening opposing nations. This made insurers fundamentally political actors.
They were important both as market readers—assessing the intricate and rapidly shifting political risks that defined the revolutionary era—and as market makers, since the information they gathered and the capital they accumulated made their opinions highly influential, even shaping questions as significant as who was winning the war.
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A Story About The Importance of Insurance In Early America
Aiden Singh: If someone has never really thought about marine insurance before, is there a scene, a document, or a moment in early American history that could help convey why it was so important in shaping the country?
Hannah Farber: I can tell you about one of the first documents I found that made me realize there was something deeper to this story. As a graduate student, I was searching for tales of adventure on the high seas. I was fascinated by American merchants who, after independence, began travelling across the world.
In the process, I came across a story in the memoirs of Mordecai Noah, who had been appointed by President James Madison as ambassador to Tunis.
On his journey to Tunis, Noah’s ship was captured by a British naval vessel during the War of 1812. Noah happened to be travelling on a French ship, and the British naval commander was interested in seizing the goods on board.
What I found particularly striking, however, was the officer’s courtesy toward the American envoy, which stood in contrast to the patriotic narrative of animosity between Americans and their former colonial rulers. He offered him a drink and showed him a log he had been keeping, recording the number of American commercial vessels the British had captured.
The commander told Noah, in essence, “You Americans are doing the math wrong. We are capturing too many of your ships. It is not sustainable for you to keep doing business this way.” Then, half-jokingly, he added, “But as long as your insurance companies do not mind, I have no objection to the continuation of the war.” The British commander was essentially saying that the duration and viability of war depended as much on the calculations of insurance companies as on the strategies of generals.
That moment completely reshaped how I thought about the nature of conflict. Insurers do not operate according to formal declarations or peace treaties. They deal in risk, and that makes them particularly active and influential in the uncertain early stages of war, when no one yet knows what will happen.
That realization pushed me to dig deeper into this period and to better understand how finance and warfare were intertwined.
I actually think this interpretation makes a lot more sense to people than the traditional narratives of the War of 1812, a conflict that famously almost no one can quite remember the reasons for.
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Influence Of London On The Early American Insurance Market
Aiden Singh: In the book, you argue that standardizing insurance paperwork was important to the operation of insurance markets in the young United States. How so? What concepts did American insurers borrow from Lloyd’s of London?
Hannah Farber: Insurance, of course, predates the United States. Maritime insurance, in particular, goes back centuries. In the book, I explain that this is not like the world of Rome, a single consolidated authority over a broad space, but rather the world of the Mediterranean, a patchwork of splintered nation-states and diverse governing bodies. In a context where the government is unreliable and cannot serve as a consistent enforcement mechanism, insurance becomes particularly important.
Paperwork, tradition, and even myth, as I discuss in the book, become shared phenomena that allow merchants to trust one another and to operate in the elaborate, high-value, and risky business they are engaged in. When insurance brokers began establishing themselves in the American colonies and the early United States, it was essential for them to emphasize that they were conducting insurance the same way it was done in London. Some of their documentation even states explicitly, “this is just like how insurance works in London”.
More broadly, there was a belief that insurance should work the same way everywhere, at all times. That was not strictly true. Merchants did not practice business identically in every place, but strong similarities offered reassurance. When contract disputes arose, merchants could rely on the underlying assumption that the rules and practices of insurance were consistent.
For a new insurance broker in colonial North America or the independent United States, this sense of continuity was especially important. The country had little international credibility, and towns were small compared to the massive insurance centers of the 18th and early 19th century, such as Amsterdam.
Americans had a lot at stake in presenting themselves as conducting insurance the same way it was done in other countries. They wanted to ensure that the customs, policies, and assumptions of the insurance contract would operate consistently, just as they did elsewhere.
Brokers wanted to show that their paperwork looked just like the paperwork used by insurers everywhere. They could tell clients, “your policy is just as valid here as it would be in London. You do not need to go to Europe; we are your neighbors, and we are doing business together in the same town.” That gave clients a stronger claim on the broker and provided greater communal security in an uncertain world.
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Differences Between London & Early US Insurance Markets
Aiden Singh: Where did American insurers diverge from those in London?
Hannah Farber: What set them apart was that they had to start from scratch in defining their relationship with the United States government.
The story in the book really explores how that relationship evolves. The United States was founded under very tenuous circumstances, as all new countries are. Questions loomed over whether the nation would hold together, whether it could pay its debts and borrow more money after the costly War of Independence, and whether it could establish the international trade it needed.
Under these conditions, American merchants and their insurance networks held significant influence. They backed American merchants and the capital they controlled was heavily invested in debt issued by the United States in its earliest years.
In effect, insurers were underwriting the United States. They were taking on the risks of this new nation as soon as they could. Merchant insurers aimed to make the fledgling United States a reliable backstop for their risk. Whenever circumstances grew tenuous, they emphasized their loyalty as American citizens, stressing that their business supported not only merchants but also the farmers who produced the goods being traded. When maritime risks grew too great, insurers turned to the United States for support, requesting warships, policy changes, or other assistance as needed.
This situation was different from London, where both the government and the insurance industry were wealthier and more established. The British government worked closely with insurers to manage issues related to warfare, commerce, and maritime trade, protecting merchant ships from capture. British insurers, however, could assert their influence more directly, warning that if they were not allowed to operate according to their preferences, they might take their business elsewhere, for example to Holland or other parts of continental Europe.
Additionally, one other difference I discuss in the book is that in Britain there were quite strict laws against the incorporation of joint-stock insurance companies. (Although that did not stop people from forming syndicates or finding various workarounds.) In the United States, however, the corporate form became very popular very quickly. Many insurers were among the earliest and most enthusiastic users of this structure, pooling their capital and bringing their expertise together within corporations.
What this resulted in was a sudden and dramatic creation of insurance companies. That does not mean the money and expertise appeared out of nowhere. Rather, it was a matter of adopting a new form that was particularly compatible with American state governments and the limits their legislatures were willing to allow.
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Premium Changes & Geopolitics
Aiden Singh: Are there any examples of a change in premiums that tells a geopolitical story or reflects broader political significance?
Hannah Farber: Yes, there is a chart later in the book, on page 159, that shows news arriving about the conflict in Haiti and the resulting jump in insurance rates as American underwriters grappled with these new political circumstances.
You can see that insurance rates remain low and fairly consistent for a couple of years, but once political unrest begins in Saint-Domingue, the rates spike dramatically. Over time, as insurers gain a better sense of the evolving political landscape, the rates gradually stabilize.
This chart illustrates how insurance is a fascinating hybrid business. On one hand, it is a business of risk, where certain factors can be calculated actuarially. For example, the likelihood of a ship springing a leak on a transatlantic voyage or the relative danger of hurricane season can be estimated. Winter Atlantic storms, similarly, are predictable to some degree based on historical patterns.
Layered on top of these calculable risks is the business of uncertainty. During this period, many risks were unknowable because they stemmed from human decisions in politics and war, which were fundamentally unpredictable. This is what makes the insurance business inherently political at the time. Insurers were experienced merchants, familiar with war and commerce, but they still had to absorb whatever information they could to stay ahead and continue doing business.
Sometimes that meant making claims on their own government, and sometimes it meant trying to keep the government out of their business.
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How Premiums Were Set
Aiden Singh: You have already touched on this a bit, but how were premiums set at this time? What kinds of information did underwriters try to gather, and how did they go about finding it? I assume they considered shipping routes, cargo, the ship’s flag, and so on.
Hannah Farber: Absolutely. This is an old business, and one of its core ideas is that the underwriter is, in a sense, spiritually on board the ship. Not all insurance works this way today, but marine insurance operates on the principle that the underwriter is fully engaged with the voyage.
The underwriter is responsible for knowing everything an experienced merchant is supposed to know. That is why most successful insurers were themselves experienced merchants. They had been merchants and brought with them particularized knowledge about weather, destinations, and even local customs, down to details like which ports expected bribes for inspectors and which did not. They were not merely followers of national laws. In an era when new countries were constantly emerging, it was often unclear which national laws applied, especially if there was a civil war or a new nation forming.
All of that had to be figured out, negotiated, or litigated. At the same time, there was a tradition, tracing back to old Mediterranean navigators, of knowing how to work within and around local laws and political structures. Insurers had to keep all of this in mind when setting their rates. They could not simply say, “the merchant must follow the law.” While they might instruct merchants to do so, if you look deeper in the handbooks for insurers, it is clear that practical guidance included knowing when to bribe a port inspector and when not to.
This kind of knowledge separated merchants from other citizens. People like Thomas Jefferson famously argued that merchants could not really be trusted because they were not rooted in the land like farmers. They went wherever they could make a profit and were not present in the country in the same way locals were.
In practice, this meant that insurers did not operate primarily according to actuarial principles but relied on general practical judgement. When political conflicts arose, they incorporated their own political assessments into their risk evaluations, alongside considerations like the soundness of the vessel and the quality of its paperwork. These evaluations were not always the same as what was strictly legal; they were negotiated between merchants and their insurers.
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How Insurers Gathered Information
Aiden Singh: When I think of insurance today, because of the nature of my work, I always think of credit default swaps. And when we consider how information gets to you in those markets, it’s electronic, super fast - a totally different world today.
Back then newspapers were one key source of information, but insurers did much more than just read the papers.They were actively out there trying to gather information.
So what mechanisms did they use to acquire everything relevant? How did information move across the Atlantic?
Hannah Farber: So insurers are news addicts. One of the first things that insurance companies do when they are first incorporated and have their first official collective checkbook is subscribe to a bunch of newspapers from different ports.
However, this is a time when commercial figures are much more dependent on interpersonal communications than on newspapers. Letters that come directly from brokers overseas or from business partners are crucial because those are the people who have skin in the game. They are going to tell you information you can trust, like what prices things are selling for at which ports.
If you are lucky, you have someone in communication with a local judge who has been ruling on insurance cases. American insurance companies will even write directly to foreign judges. During this period, when the United States and Britain were not exactly on friendly terms after the Revolution, American insurers wrote to prominent British admiralty court judges who were deciding whether property was legally condemned. They would ask how the judges viewed specific cases, especially outcomes of merchant captures that affected insurance payouts for Americans, and the judges would respond.
So even though insurers stayed on top of commercial news in newspapers, which was increasing at this time, they still relied heavily on interpersonal networks. Pre-existing relationships and trusted contacts in places where they wanted to do business were vital. This was not the modern world; you needed someone you could trust elsewhere to provide accurate information.
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The Insurance Business Model In Early America
Aiden Singh: What did a policy during this time actually cover?
Hannah Farber: A policy could cover a few different things, usually falling into three main categories. You could insure the ship itself, the cargo it carries, or the freight, which is essentially the cost of running the voyage—things like sailor salaries, supplies, and other fees. People varied a lot in how much coverage they wanted.
The most common type of insurance people bought was for incoming cargo. After spending money on the voyage and factoring in their expected profits, merchants wanted to protect their investment in the cargo arriving at port. Some insured the ship itself, some insured the entire cargo, and others opted for partial coverage. For example, you could choose to underwrite just 40% of a shipment, and that was perfectly acceptable. The system was quite flexible.
Aiden Singh: Who were the main players in the insurance market?
Hannah Farber: The insurance market at this time operated in a couple of different ways. One model was the broker-underwriter system, and the other was the incorporated insurance company. In the broker-underwriter system, the broker sits in the office, but they are not the one putting up the money. The merchant comes to the broker and says, I need a policy for my cargo arriving from such-and-such a place. You cannot lie to the broker. If you do, your policy could be voided. One interesting wrinkle, even in modern insurance, is that you can sometimes get coverage even if you do not know whether your ship has already sunk or been captured; as long as you do not know, the policy can still be issued.
The broker figures out the rate and then assembles a group of ad hoc underwriters, each of whom takes on a portion of the risk. Sometimes the broker cannot find enough underwriters, or the merchant thinks the rate is too high. There were a lot of informal, ongoing arrangements in this period where merchants would agree to keep some money circulating with an insurance broker as part of their broader portfolio of investments.
The other model is the corporate approach where money is formally pooled in a legal entity. The merchant comes to the company office, the secretary records the details, and a subset of the board of directors votes on which risks to take and at what price. As this was still an interpersonal business, the operations were not dramatically different from the broker-underwriter system.
Americans, however, were quick to adopt the corporate form. Because they were investing through corporations, they needed the money to be accessible but also productive, generating returns to buffer the risks of the business. As a result, insurers incorporated quickly once they had something to invest in, which was mostly federal debt and bank stocks in the 1790s and 1800s.
Aiden Singh: So Hamilton's Bank and the federal debt were really important for getting insurance corporations to work properly, because they needed something reliable to invest their premiums in.
Hannah Farber: That is exactly what I argue in the book. Banks get a lot more political attention in early America because people understood the political risks they posed. Banks could stand as dangerous aggregations of capital, and their founders might wield too much political influence, which is seen as risky for a democracy. Americans also remembered the East India Company and the way the British government effectively bailed out the company by forcing tea on the colonies.
Despite their close connection to banks, though, insurance companies generally faced less scrutiny. Some of these companies were essentially quasi-banks themselves, yet it was easier for them to position themselves as serving merchants, supporting international trade, and bolstering American commerce. Insurance companies in some towns even founded banks to have somewhere to put their capital.
In this way, insurance companies were instrumental in the creation of early American financial markets. They sought investment opportunities, established banks, and purchased federal debt as soon as it became available. I argue that this was one of the main reasons why incorporation happened so quickly and one of the key drivers behind the growth of early American financial markets in different cities.
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How Insurers Determined Nationality
Aiden Singh: How did insurers determine whether something counted as American or not?
Hannah Farber: Merchant ships in this period are fascinating because they are some of the most impressive technological achievements of their era, both in how they are built and in the social arrangements they require.
This is kind of like a university or a corporation, which are also incredibly complex human systems. You have to think of a merchant ship the same way. There is a lot at stake in questions of whether people and property are American in an age of constant conflict. If you are fighting the British, you need to know who counts as British and what counts as British property.
At the same time, these ships are complicated and effective technologies. They might carry goods from multiple countries, owned by people of different nationalities, and have multinational crews. Defining an American citizen is tricky, let alone verifying identity. So sailors get asked all kinds of detailed questions, like where their families live. Property is equally complicated, requiring close scrutiny of paperwork, with rules that are constantly changing.
One of the arguments of the book is that American insurers were among the institutions that helped determine what counted as American property, because they had skin in the game. The United States government came to see them as fairly trustworthy. There is a story from a New York port where the Admiralty was not sure how to decide what was American property, but they said, if the insurance company says it is American, that is good enough for us.
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Insurance & The Federal Courts In Early America
Aiden Singh: You mentioned the relationship between insurance companies and early financial markets, with insurers looking for investment opportunities. The relationship between insurance companies and the courts is also interesting. How did insurance disputes channel activity into federal courts?
Hannah Farber: Insurance lawsuits are really important because there is a lot of money at stake. Merchants have money, insurers have money, and that money is right there, often tied up with farmers or even major landowners. Insurance law emerges in this period of international warfare, when property is constantly in motion and frequently at risk of being confiscated.
One of the things I discuss in the book is how insurers’ judgments on property matters became extremely influential in the first American courts. These courts are trying to litigate property disputes that arise from this era of property loss and warfare on the high seas.
On insurance disputes, there is a lot of money at stake. One of the things I like to say, which I did not put in the book, is if you watch the musical Hamilton, in the second act, once he has made it big, he comes out in this nice green blazer that signals he has made a lot of money. That blazer represents more than just wealth: Hamilton was essentially on retainer for several American insurance companies.
This was coordinated, big money. The merchant world is really complicated, and one of the big things insurers do is help organize it. They coordinate merchant activity and aggregate information, which makes them a source of power and influence.
American judges emerging from the Federalist era in the 1790s recognized that one of their major property challenges was figuring out how to adjudicate American property. A random jury of twelve farmers simply is not equipped for that task. It might sound snobby, but it is also somewhat true. Farmers know a lot about their own world, but they do not know how to interpret an Amsterdam insurance policy. So judges often turned to insurance company leaders and presidents to help navigate what everyone understood to be merchant law.
I argue in the book, and it is not my original argument, that we should take this concept seriously: merchants had their own law. They conducted intricate business across international boundaries and operated in dialogue with one another. Maybe that makes them clever, maybe it makes them potentially treasonous. Either way, they had a body of customs that they all generally agreed upon.
When these first Federalist-appointed American judges encountered them, their instinct was not to dismantle this potentially dangerous aggregation of capital and information. They thought, let us go to the merchants, learn what merchant law is, and bring it into United States law so that commerce under American law can function effectively.
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War Risk & Insurance Premiums
Aiden Singh: During the Revolutionary War and the War of 1812, how was war risk incorporated into insurance premiums, and how did this influence merchants’ behavior?
Hannah Farber: We do not really know exactly how war risk was priced because I did not come across internal discussions among insurance company directors about their pricing.
What I did see were conversations between companies saying things like, “We think you are pricing this too low, raise your rates,” because they all had a shared interest in the sector. Today you might call that collusion, but at the time, they did not see anything wrong with it. There are no actuarial calculations possible in the age of revolution. Pricing comes from their political judgment and sense of what the business could tolerate.
Their decisions strongly influence merchants. Merchants might get feedback from insurers saying, “That route is too risky, we will not insure it,” or “We will insure it only at a rate you will not pay.” Merchants take their cues from insurers, and that shapes American commercial behavior. Politicians are aware of this tension. They want merchants to behave patriotically, especially avoiding trade with the enemy, but insurers sometimes underwrite voyages that are technically illegal or against patriotic expectations if they think the merchant can succeed and both parties can profit.
Insurance companies avoid outright defiance of the law, but they master the gray areas. For example, during the War of 1812, when Americans are not supposed to trade with certain countries, a Boston insurance company’s books claim policies are underwritten for Spaniards, not Americans. In reality, Americans are the ones trading with Rio de Janeiro and elsewhere. Often, the policy books do not even list a Spanish buyer. They leave a blank space because everyone knows the named Spaniard does not exist. It is illegal, but they are confident enough to take that risk.
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The Embargo of 1807
Aiden Singh: I want to discuss the Embargo of 1807. How did it affect the insurance business?
Hannah Farber: Insurers tend to dislike the embargo because it is like when the music stops in musical chairs and everybody just sits down: insurers do not make any money if everybody is sitting tight. They tend to protest the embargo.
They say that they are the ones regulating American commerce. They calculate whether it is safe for Americans to do business in the world or whether they are subject to British capture, French capture, or other risks. Danes are out there, Neapolitans as well. It is a dangerous world, but insurers claim that they have the expertise. They argue that the United States will lose money if it declares by fiat that Americans cannot trade with the world. They want to handle it as they always have. Merchants have managed their own business and each other's business for generations through insurance. They do not use these words exactly, but the spirit is the same. Just let them do their work.
Sometimes they request additional warships to defend American commerce because the American navy famously has only six ships, which is not enough to protect commerce anywhere. Port city merchants build warships on spec, offering them to the American government and asking to be reimbursed or to receive bonds reflecting their investment.
American port city merchants operate on multiple fronts to reduce risk. They found insurance companies, spread property across multiple vessels and destinations, lobby the government for more protection, and arm their ships. If they are building warships on spec, they try whatever they can to get ahead.
What they want most is to be in charge of this process rather than the government of the United States. They insist that this is their business, not the government’s.
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Relevant Archives
Aiden Singh: Were there any archives that helped you unlock this research project?
Hannah Farber: A lot of the material for this project is actually in plain sight. It has mostly been used by economic historians who focus on collecting data on rates and prices over time, and who are interested in the corporate form and whether corporations improve the efficiency and effectiveness of the insurance business. This project builds on some of that same material but insists that this is not just an economic story. Every economic story is also inherently political.
It is also a cultural story about what people value. The main challenge of the project was not finding sources but figuring out how to make them interesting. I learned how to read insurance company books and put them in conversation with what I knew about the political world of the time. I read a lot of merchant handbooks and insurer guides written for merchants entering business and for people in the insurance trade. I basically taught myself this material.
That is what I love about this era of history. Anyone can come in and say, imagine I am a 14-year-old in a counting house. Can I learn this career for myself? There is a fair amount of math involved, but it is also deeply connected to the political world, the world of war and risk, and the story of a country coming together in a way that requires it to bet on itself.
I find it fascinating to consider the United States at that moment. Was it a bubble, overvalued, or would its value turn out to be real? Once insurers were invested in the United States, they had a lot at stake in asserting that this value was real. I think that is a magical moment with lessons that never expire.
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Editing by Harpreet Chohan. Research By Bhavya Ahuja.