History:
First forms and methods
Archaeological evidence suggests that some ancient merchants in Babylon and China followed some form of risk transfer or distribution system as early as the third and second millennia BC. Chinese merchants traveling along dangerous rivers would distribute their goods across several ships to limit losses if the ship capsized, sank, or was stolen. The Babylonians developed a system of collateral mentioned in the famous Code of Hammurabi around 1750 BC, which was used in Mesopotamia and some Mediterranean countries. According to this system, a merchant who borrowed money to finance his trade was entitled to pay the creditor an additional sum in return for the latter’s guarantee to cancel the loan if the cargo was lost or stolen at sea. In the first millennium BC, the Rhodians developed an insurance system known as the “general average,” whereby a group of merchants paid a sum of money to ensure that their goods were shipped at the same time on the same ship. The collected premiums were used to pay off the debts of any merchant whose goods were damaged or lost during shipping, whether by storm or sinking.
Special or separate insurance contracts (such as insurance policies unencumbered by loans, debts, or any other form of contract) were invented in the Republic of Genoa during the fourteenth century AD, and the first known written insurance contract dates back to 1347 AD. In the following century, the idea of insurance developed significantly, and it spread among the merchants of the Italian cities, and its premiums varied intuitively according to the expected risks. These modern insurance contracts allowed insurance to be separated from investment for the first time in history, and this separation proved its worth starting with marine insurance.
Modern Insurance
It is accepted among commentators that marine insurance was the first form of modern insurance in the aforementioned sense, in the fourteenth century AD, following the flourishing of maritime trade and its spread between Italian cities and the countries of the Mediterranean basin. The spread of marine insurance is due to the marine loan contract called the “contract of serious risks”. It is a type of contract that was previously common in Rome and Athens. According to this contract, the ship owner borrows a sum of money to repair and equip it, or the cargo owner obtains an amount to cover the price of the goods that make up the shipment, and in both cases the ship or its cargo is a guarantee to recover the loan amount and its interest. This agreement also includes a condition stipulating that if the ship sinks or its cargo is damaged, the lender does not recover anything, but if it arrives safely, the borrower is obligated to return the loan amount with its exorbitant interest. However, the Catholic Church considered this contract illegal because it included forbidden interest in the Christian faith, so it prohibited the stipulation of interest in all loans, including marine loans. This was done by virtue of a decree from Pope Gregory IX in 1234 AD. The aforementioned church fatwa led to the emergence of a new system, very close to the insurance contract in its current sense, to confront marine risks. This system was represented in a contract of sale suspended on a resolutory condition, whereby a person agreed to buy the ship and the goods on it for a price paid by this buyer (the insurer) if the goods did not arrive safely. This contract included a resolutory condition, whereby the sale would be rescinded if the ship arrived at the port of arrival, with the ship owner, who is at the same time the seller and the insured, pledging to pay a specific amount to the buyer in exchange for bearing this risk. Commentators believe that the basic elements of the insurance contract were found during the development of this process, as there is the financial compensation that must be paid when a disaster occurs, and there is the premium, which is in exchange for bearing the risk, as well as the risk insured against. As for land insurance, its appearance was delayed until the seventeenth century AD. In this century, specifically in 1666 AD, a huge fire broke out in London, destroying the great St. Paul's Cathedral, 89 churches, and more than 13,000 homes. There was no way to compensate for the losses resulting from this fire. This led to the need for land insurance, and its first form appeared in the form of fire insurance. The engineer Sir Christopher Wren referred to allocating a site for an "insurance office" in the manuscript of its reconstruction in 1667 AD. After that, several attempts were made to establish a specific insurance system that would protect people from the risk of fires, but none of them were successful. However, in 1681 AD, the economist Nicholas Barbon established the first fire insurance company in cooperation with eleven people, and called it "The Insurance Office for Houses", and about 5,000 homeowners signed contracts with it. From England, the idea of fire insurance spread to many countries, including France, where the first fire insurance company was formed in 1750 AD. It is noted that fire insurance was initially limited to real estate only, excluding movable property, but the development of the matter led to its inclusion in it as well. The end of the eighteenth century AD witnessed the spread of fire insurance in European and American countries with all its legal and technical characteristics known today.
The emergence of the first insurance companies was accompanied by the first insurance schemes for underwriting by venture capital. By the late seventeenth century, the growing importance of London as a world trading centre had led to a rise in demand for marine insurance. In the late 1780s, Edward Lloyd opened a coffee house that became a meeting place for all parties involved in maritime trade and shipping, who wanted to insure their goods and ships, and who were prepared to agree to enter into such ventures. These humble, informal beginnings led to the establishment of a credit market, known since then as Lloyd's of London, and several other insurance and shipping companies and ventures associated with it. Life insurance was late in its emergence, as it was initially considered immoral and unchristian and a kind of gamble on human life. Therefore, it was prohibited by legislators in many parts of Europe, and it was prohibited in France by order issued by King Louis XIV in 1681 AD. However, in the eighteenth century, statistics on death began to appear, which made it possible to determine the degree of probability of death risk, and thus it became possible to determine the insurance premium on scientific and technical bases, after it was a kind of gambling, and this led to the emergence of life insurance. The first insurance company of this type in England was the "Amicable Society for a Perpetual Assurance Office", which was founded in 1706 AD by the Reverend William Talbot and Sir Thomas Allan. In 1762 AD, Edward Rowe Morris founded another insurance company, "The Equitable Life Assurance Society". The first French life insurance company appeared in 1787 AD, and its name was “Royal Insurance Company” (in French: Compagnie Royale d’assurances). Since that date, and with the advancement of statistical foundations that are relied upon to determine the degree of probability of mortality risk and the value of premiums, life insurance became popular and widespread.
Liability insurance emerged as a result of economic changes and developments brought about by the industrial revolution, the spread of mechanical machines, cars, and land, sea and air transportation. This development led to an increase in human activity and its expansion, accompanied by an increase in accidents and civil liability claims for injuries to others. This led to the emergence and development of the liability insurance system, where a person insures his liability resulting from the use of modern civil means such as insurance against car accidents, and insurance against liability for accidents that occur to workers due to mechanical machines and modern civil tools, where business owners insure against their liability due to these accidents, or insure their workers directly against accidents that they are exposed to while performing their work. It is noted that accident insurance was initially similar to contemporary disability insurance. The first company to offer accident insurance was the Railway Passengers Assurance Company, an English company founded in 1848 to insure damages caused by the high rate of train casualties. By the late nineteenth century, European governments began to launch national insurance programs against sickness and disability, and Germany was one of the pioneering countries in this field, as it had begun implementing charitable projects in both Prussia and Saxony since the 1940s of the aforementioned century, and during the 1980s, Chancellor Otto von Bismarck introduced a system of pensions for the disabled, insurance against accidents, and medical care, which formed the foundations on which Germany grew as a welfare state. In Britain, several laws and regulations were enacted more broadly during the Liberal government in 1911, the most prominent of which was the National Insurance Act, which granted the British working class the first contributory insurance system against sickness and unemployment. This system was expanded extensively after World War II thanks to the Bevridge Report, which made the country one of the welfare states. Insurance has developed significantly during the twentieth century and has become an integral part of various aspects of human activity, especially in the field of liability insurance, the most important of which is insurance for professionals, such as doctors, pharmacists, architects, lawyers, and others, against civil liability arising from their mistakes. Other forms of insurance have also emerged that were not known before, such as insurance against nuclear risks and insurance against the risks of using computers and electronics.
Examples of legislative regulation of insurance
In Egypt
The oldest Arab country to adopt insurance is Egypt. Egyptian legislators began to regulate marine insurance in Articles 173 to 234 of the Maritime Trade Law issued in 1883, which was later replaced by Maritime Trade Law No. 8 of 1990. In contrast, other types of insurance remained without legislative regulation in the old civil law, until the current civil code was issued, where the legislator included this code regulating the insurance contract in Articles 747 and beyond. The Egyptian legislator was influenced in these provisions by the French Insurance Law issued in 1930. It should be noted that the failure to regulate the land insurance contract before the issuance of the current civil code did not mean a lack of recognition of the insurance system or the contracts that were concluded and related to the various forms of insurance. The insurance system spread early in Egypt and many disputes related to different types of codification were brought before the judiciary. The Egyptian judiciary initially resorted to general rules in order to resolve insurance disputes, and it was natural for it to resort first to comparing the provisions of land insurance to the provisions of marine insurance included in the Maritime Trade Law. In this way, the provisions of marine insurance extended to land insurance to the extent that it was compatible with them. However, this comparison was often not useful, due to the fundamental differences between the two systems. Therefore, the judiciary applied general rules in obligations and contracts to confront the different forms in which it was not useful to compare marine insurance. In this regard, the judiciary applied the basic rule that the contract is the law of the contracting parties. It is noted that the preliminary draft of the current Egyptian Civil Code included ninety-nine articles on insurance, and the review committee deleted some articles that dealt with detailed provisions, then the Civil Law Committee of the Senate decided to delete many texts of this draft based on the fact that organizing the details of this contract requires elaboration in a way that disrupts the consistency of the section on contracts, and that the insurance contract is still in the prime of its development and it is more appropriate for its details to be far from the scope of the codification, and on this basis the articles regulating insurance in the Egyptian Civil Code became twenty-five articles, which made some describe the Egyptian legislation as incomplete in this regard.
The need arose to issue some legislation specific to certain types of insurance that the law made mandatory to protect some categories, including insurance against liability arising from accidents and occupational diseases and other social risks included in social insurance laws. As the activity of insurance companies in Egypt expanded and their importance increased on the economic and social levels, the legislator intervened to regulate the control and supervision of insurance bodies with the aim of determining the extent to which they adhere to the foundations on which insurance is based, protecting the rights of the insured, and monitoring the extent to which these bodies fulfill their obligations. The first legislative intervention in this regard was pursuant to Law No. 92 of 1939. In July 1960, Law No. 1961 was issued to nationalize insurance companies, followed by the establishment of the Egyptian General Insurance Corporation to include all insurance companies and coordinate work between them. Following the economic openness policy, the private sector was given the opportunity to work in the insurance sector again, which necessitated monitoring and controlling the legislation regulating insurance bodies in line with the new economic trends. For this purpose, Law No. 119 of 1975 regarding insurance companies was issued to replace Law No. 195 of 1959. Presidential Decree No. 221 of 1976 was also issued to establish the Egyptian General Insurance Authority to replace the General Insurance Corporation. Then Law No. 10 of 1981 was issued, which abolished the previous law and decree and replaced them with a new law, which is the Insurance Supervision and Control Law in Egypt. In the mid-nineties, and as a result of the requirements of economic reform policies and market liberalization, Law No. 10 of 1981 was amended by Law No. 91 of 1995 to allow foreign participation of 49%. The latter law was then amended by Law No. 156 of 1998 to allow foreign participation of up to 100%. Finally, Law No. 118 of 2008 was issued, which obligated insurance companies that combine life insurance and property insurance activities to separate them within two years from the date of issuance of the law. This period may be extended for another period with the approval of the Authority.
In Lebanon
In Lebanon, the legislator presented marine insurance in the Maritime Law in Article 293 and following of this law. As for land insurance, there was no legislative regulation for it before the issuance of modern legal collections until the Law of Obligations and Contracts was issued, where it presented the provisions of the guarantee in the first chapter of the tenth book. The Lebanese Law of Obligations and Contracts was more detailed in this regard than the Egyptian Civil Law, as it dealt with the general provisions of insurance and how to prove the guarantee contract and the obligations of the guarantor and the guaranteed and the reasons for invalidity and termination, and the effect of the passage of time on the contract, and devoted chapters to discussing fire insurance, life insurance and accident insurance. The Lebanese legislator was influenced in his formulation of the aforementioned texts by the French Insurance Law issued in 1930 AD, in addition to being influenced by some other laws in this field such as the Swiss law issued in 1908 AD and the German law issued in the same year. It is noted that Lebanese law did not pay attention to compulsory insurance for work emergencies or occupational diseases or others until a recent stage with the issuance of the Social Security Law by Decree No. 13955 on September 26, 1963. Pursuant to this law, the Lebanese legislator established a national social security fund that was considered an independent institution of a social nature, enjoying a legal personality and financial and administrative independence. This fund includes the insurance body related to maternity insurance, work emergencies and occupational diseases, the family compensation system, and the end-of-service compensation system. Thus, the compulsory insurance system began to enter the scope of Lebanese legislation. It should be noted that this insurance falls within the framework of social security and not the private insurance that takes place between individuals and insurance companies. As for the compulsory insurance for car accidents, it is noted that despite the reference of Traffic Law No. 76 issued on December 26, 1967 to this insurance pursuant to Article 734 (b) thereof, the law relating to this insurance was delayed in issuing until 1977, when Legislative Decree No. 105 was issued on June 3 of that year, regarding the compulsory insurance for civil liability for bodily harm caused by a land vehicle to others. According to Article 8 of the Decree, a private institution for public benefit known as the “National Institution for Compulsory Insurance” must be established to undertake the tasks specified in the legislative decree. However, the law regulating compulsory insurance for car accidents did not enter into force until 26 years later, specifically on April 5, 2003, after some amendments were made to it. As for the organization of insurance operations and the supervision of the bodies implementing them, this organization was also delayed under Lebanese legislation. Such organization was not issued until Decree No. 9812 issued on May 4, 1968, with the aim of regulating insurance bodies in Lebanon. This law has subjected to its provisions all Lebanese and foreign companies, groups and institutions that practice or may practice in Lebanon all or some of the operations that are generally related to insurance and reinsurance in all the areas mentioned, whether related to life insurance, disability and old age, joint investment operations, or insurance and reinsurance operations against damages resulting from transportation risks, insurance of sea and air vessels, or insurance and reinsurance operations resulting from all accidents, civil liability, vehicles, work emergencies and personal accidents, loan insurance and other risks not explicitly stipulated in this law.
In Kuwait
Kuwait Insurance Company was established in 1960 by Amiri Decree No. 7 of the same year, to be the leading company in the vital insurance fields for the oil and gas sector in the Arabian Gulf region. The purpose of its establishment was to carry out insurance business of all types such as life insurance, fire insurance, theft insurance, general accidents insurance, marine and aviation insurance, and automobile insurance, as well as to invest capital and movable and immovable assets in the manner decided by the Board of Directors, taking into account the provisions of the law. Kuwait began implementing pension systems on January 1, 1955, as part of the government employees and retirement system. Then, the first independent pension law was issued by Decree-Law No. 3 of 1960, which came into effect on April 1 of the same year, and included government employees, both civilians and military personnel. This was followed by an independent law for pensions and retirement benefits for military personnel issued by Decree-Law No. 27 of 1961, which came into effect on September 9 of the same year. None of the previous systems were an integrated social insurance system, as they covered a limited aspect of it, covering specific categories, namely government employees appointed to permanent positions and military personnel. The first comprehensive social insurance law was issued on October 1, 1976 by Amiri Decree Law No. 61 of the aforementioned year, and the General Organization for Social Insurance was established to implement the system issued by it. It includes old-age, disability, sickness and death insurance for civilian workers in the government sector and in the private and oil sectors, and old-age, disability, sickness and death insurance for non-employees of others, self-employed workers and those in their position. The first section of the law began to be implemented on October 1, 1977, and the second on March 1, 1981. The implementation began optionally for a period of five years from the aforementioned date, then this insurance became mandatory as of March 1, 1986. Law No. 11 of 1988 was also issued to apply the Social Insurance System voluntarily to Kuwaitis working for an employer not subject to the Social Insurance Law inside and outside Kuwait, and implementation began on October 1, 1988. In 1992, Law No. 128 was issued on the Supplementary Insurance System, which came into effect as of January 1, 1995, considering the aforementioned insurance systems, whether civil or military, as basic systems complemented by the supplementary system that covers salary elements that do not fall within the concept of salary in basic insurance, and decides on a pension for them that is calculated according to special rules, added to the retirement pension and considered part of it.
In the United States of America
Insurance in the United States is regulated by the McCarran-Ferguson Act, commonly known as Public Law 15, a federal law that exempts insurance companies from most federal regulations and laws, including federal antitrust laws, up to a certain extent. The law was passed in 1945 by the 79th Congress after the United States Supreme Court ruled in Government v. Southeastern Insurance Agents Association that the federal government could regulate insurance companies under the Commerce Clause of the U.S. Constitution. This law stipulates that American insurance companies must submit a set of periodic proposals that ensure the intervention of the federal government in the field of insurance, and the establishment of a non-profit alliance of insurance agencies in each state separately called the "National Association of Insurance Commissioners", which works to reconcile the laws and legislation of the various countries related to this matter. And that work be carried out in coordination with the National Conference of Insurance Legislators, which must also work to reconcile the insurance laws in the various states. It is noteworthy that the legislation related to insurance in the United States was historically enacted by the governments of the individual states, and the first insurance commissioner was appointed in New Hampshire in 1851 AD, and since then the American insurance system has been in continuous development. In 2010, Congress passed the Dodd-Frank Wall Street Securities Reform and Consumer Protection Act to increase transparency and accountability in the U.S. financial system, a move some saw as the most significant change in U.S. financial regulations since the Great Depression. The law had a significant impact on the U.S. insurance system, creating the Federal Insurance Office, part of the Treasury Department, which was given the authority to monitor all aspects of insurance companies’ operations to identify and address any legal and regulatory loopholes in the state regulatory system where the company is based. The law also created the Financial Stability Oversight Council, which is tasked with monitoring financial services markets, including insurance companies, to identify risks that could affect the financial stability of the United States.
In the European Union
The adoption of the Third Non-Life Insurance Directive and the Third Life Insurance Directive in 1992, and their implementation in 1994, led to the creation of a single insurance market in Europe, whereby any insurance company of the nationality of any of the EU member states could provide its services to any person residing therein after obtaining the necessary authorization from the head office. As for insurance in the United Kingdom, the Financial Services Authority has been responsible for regulating it since it replaced the General Insurance Standards Board in 2005. The most prominent British laws related to insurance are the Insurance Companies Act of 1973 and its counterpart of 1982, and the Act of 2012, which made several reforms to the insurance system. In France, the provisions relating to insurance were collected in a single code in 1976. This code included, in addition to the provisions of the Insurance Law issued on July 13, 1930, the provisions of the Marine Insurance Law issued on July 3, 1967, as well as all laws, regulations and decisions relating to insurance. The current code contains three sections: the first includes legislative provisions, the second is devoted to regulations, and the third section includes ministerial decisions regarding insurance. Since the issuance of the French Insurance Code in 1976, several laws have been issued that have led to amending the provisions of this code. The most important of these laws are: the law issued on July 13, 1982, concerning compensation for natural hazards; the law issued on June 11, 1985, aiming to strengthen the information of the insured and transparency in life insurance contracts and the formation of funds; the law of July 5, 1985, aiming to improve compensation for victims of traffic accidents; and finally, Law No. 89 issued on December 31, 1989, aiming to adapt French insurance legislation to the opening of the European market.
