The Gambling Act
Categories
Regulation
Markets
Time
1746
Countries
United Arab Emirates
In Great Britain, until the last quarter of the 18th century, insurance was a popular means for making bets of all kinds, including wagers on the longevity of the high-born or famous, the date by which a besieged city might fall, or the true sex of a cross-dressing French aristocrat. Insurance offices that proudly advertised themselves as providing security for wives and children not only raised no objection to wagering policies but actually drafted a list of celebrity candidates they thought were particularly suitable for insuring.
It is against this background that the Gambling Act of 1774 must be understood, which banned wagering policies and all other insurances in which no "insurable interest" could be demonstrated.
Not only insurance, but also reinsurance fell victim to anti-gambling legislation. Reinsurance appeared in the marine insurance market in the later 17th century in the guise of so-called "interest or no interest" policies. Such policies dispensed with the requirement that purchasers demonstrate a direct financial stake in the property or event to be insured. John Millar, a 18th-century authority on insurance law, explained that such policies created a situation in which "the underwriter in one policy becomes the assured in another, upon the same subject, with a view of withdrawing himself from hazard."
According to Millar, underwriters typically sought reinsurance when vessels they had insured were late making port, thus raising a suspicion that they concealed their private knowledge of a likely loss in order to fraudulently shift the liability to another party. The contemporary popularity of using "interest or no interest" polices as a vehicle for gambling on shipping further tainted reinsurance, and, as a result, already in 1746 parliament banned both practices by prohibiting all "interest or no interest" policies.
This draconian regulation of marine reinsurance led to an idiosyncratic development of secondary risk hedging in England. Co-insurance practices and Lloyd's gradually dominated the market, and prevented the formation of a significant Continental-style reinsurance industry for decades.
It is against this background that the Gambling Act of 1774 must be understood, which banned wagering policies and all other insurances in which no "insurable interest" could be demonstrated.
Not only insurance, but also reinsurance fell victim to anti-gambling legislation. Reinsurance appeared in the marine insurance market in the later 17th century in the guise of so-called "interest or no interest" policies. Such policies dispensed with the requirement that purchasers demonstrate a direct financial stake in the property or event to be insured. John Millar, a 18th-century authority on insurance law, explained that such policies created a situation in which "the underwriter in one policy becomes the assured in another, upon the same subject, with a view of withdrawing himself from hazard."
According to Millar, underwriters typically sought reinsurance when vessels they had insured were late making port, thus raising a suspicion that they concealed their private knowledge of a likely loss in order to fraudulently shift the liability to another party. The contemporary popularity of using "interest or no interest" polices as a vehicle for gambling on shipping further tainted reinsurance, and, as a result, already in 1746 parliament banned both practices by prohibiting all "interest or no interest" policies.
This draconian regulation of marine reinsurance led to an idiosyncratic development of secondary risk hedging in England. Co-insurance practices and Lloyd's gradually dominated the market, and prevented the formation of a significant Continental-style reinsurance industry for decades.
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Categories
Regulation
Markets
Time
1746
Countries
United Kingdom
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