Financial arrangements

Financial arrangements

Before we get to it, a bit of history is in order. It was not until 1350s that the actual insurance contracts began to appear. Gradually, contracts became standardized. In the late 17th century, dedicated to the insurance market began to develop in London. After the big fire of 1666, insurance against fire took off. A specialized marine insurance market began to develop around Edward Lloyd's coffee house in London's Tower Street. In 1774 the Society of Lloyd was formed to collect 79 life members who each pay £ 15 fee. The responsibility of underwriters was unlimited. Financial arrangements could be described as "pay-as-you-go. The goal was to collect enough premiums for one year to cover payments that year and left margin of profit. Later, limited liability companies as Sun Insurance were placed. Most of the insurance schemes that existed at the beginning were gambles. There is no adequate theoretical basis existed for assessing the risks that were covered. Then there were some great discoveries.

v Blaise Pascal and Pierre de Format developed important concepts of probability.
v In 1662, John Graunt worked on mortality statistics.
v Edmund Halley save life tables.
v in 1705, Jacob Bernoulli developed the law of large numbers. Conclusions can be drawn with some degree of security than large enough samples.
v in 1733, Abraham de Moivre was working on a normal distribution.
v In 1738, Swiss mathematician Daniel Bernoulli proposed a new theory. The value of an item can not be based on its price, but the utility leaves. The utility resulting from any small increase in wealth is conversely proportional to the quantity of goods previously possessed.
v In 1764, Bayes developed a theory about conditional probability.