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Commercial Risk and Capital Formation in Early America: Virginia Merchants and the Rise of American Marine Insurance, 1750–1815

Published online by Cambridge University Press:  13 December 2011

A. Glenn Crothers
A. Glenn Crothers
Affiliation:
A. GLENN CROTHERS is associate professor of history atIndiana University Southeast.
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Abstract

In the late eighteenth century, northern Virginia's grain-based slave economy prompted a thriving but risky overseas trade. The merchants who conducted this trade sought to manage their risks by purchasing marine insurance, initially from British and northern U.S. sources. After the American Revolution, however, the expense and inconvenience of obtaining insurance abroad prompted merchants to create local institutions modeled on northern practices. Most notably, in 1797 Alexandria merchants established the Alexandria Marine Insurance Company, an incorporated entity that helped manage the risks of overseas trade during the dangerous Napoleonic Wars, enlarged local sources of capital, and, in turn, played a significant role in stimulating regional economic development. The appearance of this marine insurance company (and others like it) reveals the significant role that financial intermediaries played in the development of the southern slave economies in the early republic.

Type
Special Forum: Reputation and Uncertainty in Early America
Information
Business History Review , Volume 78 , Issue 4 , Winter 2004 , pp. 607 - 633
Copyright
Copyright © The President and Fellows of Harvard College 2004

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References

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10 Virginia Journal and Alexandria Advertiser, 11 Mar. 1784; Columbian Mirror and Alexandria Gazette, 15 Apr. 1797.

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13 Bridenbaugh, Cities in the Wilderness, 360; Bridenbaugh, Cities in Revolt, 287; McCusker and Menard, Economy of British America, 347–48.

14 Bridenbaugh, Cities in Revolt, 93.

15 See, for example, Charles Steuart to Edward Clark Parrish, 28 Sept. 1751, Steuart to George Keith, 24 Feb. 1752, Steuart to James Buchanan, 24 Feb. 1752, Steuart to Richard White & Co., 8 Apr. 1752, Steuart to Samuel Turner, 19 July 1754, in Charles Steuart Letterbook, 1751–1763, Historical Society of Pennsylvania (hereafter HSP).

16 See, for example, Steuart to “Mr. Dunlop,” 24 Aug. 1754, Steuart to George Campbell, 13 Sept. 1755, Steuart to Thomas Knox, 13 Sept. 1755, Steuart Letterbooks, HSP.

17 Steuart to William Bowden, 15 June 1752, Steuart to John Mills, 24 Aug. 1754, Steuart Letterbooks, HSP.

18 Steuart to Morton & Campbell, 12 Oct. 1755, Steuart to Thomas & John Mills, 15 Oct. 1755, Steuart Letterbooks, HSP.

19 Gillingham, Marine Insurance, 66; Bridenbaugh, Cities in Revolt, 287; Steuart to James Dunlop, 29 July 1758, Steuart to John Nelson, 26 Feb. 1759, Steuart Letterbooks, HSP.

20 Steuart to William Bowden: 2 Apr., 13 Sept., 11 Oct., 1755; 2, 25 Aug., 29 Sept., 13 Nov., 25 Dec. 1756; 24 June (quote), 18 Sept. 1757, Steuart Letterbooks, HSP.

21 Between June 1757 and June 1759 Steuart placed eleven orders for insurance on Nelson in Philadelphia, six orders on Dunlop in Glasgow, and four orders on Bowden or Buchanan in London. On Philadelphia orders, see Steuart to Nelson, 5 May, 25 Sept., 12 Nov., 14 Nov., 18 Dec. 1758; 1, 3, 8 Jan., 26 Feb., 10 May, 16 June 1759. On Glasgow orders, see Steuart to George Campbell, 30 Mar. 1758; Steuart to Capt. Paterson, 12 May 1758; Steuart to Dunlop, 12, 17 June, 29 July, and 19 Sept. 1758. On London orders, see Steuart to Bowden, 11 Oct. 1757. 30 Jan. 1758, 6 Nov. 1758, and Steuart to William Croydon, 6 Apr. 1758, Steuart Letterbooks, HSP.

22 Virginia Journal and Alexandria Advertiser, 19 Jan. 1786; Fowler, “Marine Insurance,” 155–59; Gillingham, Marine Insurance, 52, 55–62; Wright, Charles and Fayle, C. Ernest, A History of Lloyd's from the Founding of Lloyd's Coffee House to the Present Day (London, 1928), 61Google Scholar; Thomas and James Franklin to Thomas Riche, 27 Oct. 1762, in Letters of American Friends, 1676–1986, Haverford College Quaker Collection, Haverford, Pa.; North, Douglass C., “The United States Balance of Payments, 1790–1860,” in Trends in the American Economy in the Nineteenth Century: Studies in Income and Wealth (Princeton, 1960), vol. 24, pp. 599–600Google Scholar.

23 Buel, Richard, In Irons: Britain's Naval Supremacy and the American Revolutionary Economy (New Haven, 1998Google Scholar), esp. 96–106. St. George Tucker's family-owned mercantile firm, heavily involved in smuggling in Virginia during the war, saw insurance premiums rise to “50 percent of a cargo's value” by the late-1770s; see Hamilton, Phillip, The Making and Unmaking of a Revolutionary Family: The Tuckers of Virginia, 1752–1830 (Charlottesville, 2003), 38Google Scholar.

24 Columbian Mirror and Alexandria Gazette, 25 May 1797.

25 Ruwell, Eighteenth-Century Capitalism, 39–40; Hardy, Early Insurance Offices, 92; Marryat, Joseph, Observations upon the Report of the Committee on Marine Insurance, with a few Incidental Remarks … (London, 1810), 23–25, 57Google Scholar.

26 Ruwell, Eighteenth-Century Capitalism, 60; Buel, In Irons, 98–99; Fowler, History of Insurance, 47; Fowler, “Marine Insurance,” 164–65; Blodget, Samuel, Economica: A Statistical Manual for the United States of America (1806; repr., New York, 1964), 17Google Scholar. On opposition to corporations in early America, see Wood, Radicalism, 318–22.

27 Ruwell, Eighteenth-Century Capitalism, 44–60; Fowler, History of Insurance, 48–51; James, Biography of a Business, 11–94; Davis, , Essays, vol. 2, pp. 239–47, 334Google Scholar; Shepherd, Samuel, The Statutes at Large of Virginia from … 1792 to … 1806, 3 vols. (Richmond, 1835; repr., New York, 1970), vol. 3, pp. 130–35Google Scholar; Blodget, Economica, 64; Marryat, Observations (appendix), 14.

28 Seyfert, Adam, Statistical Annals: Embracing Views of the … United States (Philadelphia, 1818), 79–81Google Scholar; Columbian Mirror and Alexandria Gazette, 5 Jan. 1797; Syrett, Howard C., ed., The Papers of Alexander Hamilton, 26 vols. (New York, 1961–1979), vol. 21, pp. 465–66Google Scholar.

29 Alexandria Advertiser & District of Columbia Daily Advertiser, 11 Oct. 1798; Thomas McKnight, “Public Instrument of Protest … 11 January 1799,” and “Sale of the Hull and Materials of the Ship Polly and Nancy … 29 March, 1799,” both in McKnight Family Papers, 1768–1824, Alderman Library, University of Virginia, Charlottesville, Va. For more on McKnight's family and mercantile career, see Miller, T. Michael, Artisans and Merchants of Alexandria, 1780–1820, 2 vols. (Bowie, Md., 1991–1992), vol. 1, pp. 306–7Google Scholar; and Brockett, F. L., The Lodge of Washington: A History of the Alexandria Washington Lodge No. 22, 1783–1876 (Alexandria, Va., 1876), 139–42Google Scholar.

30 Alexandria Advertiser, 17 Apr. 1798.

31 Crothers, A. Glenn, ”‘The Projecting Spirit’: Social, Economic and Cultural Change in Post-Revolutionary Northern Virginia, 1780–1805” (Ph.D. diss., University of Florida, 1997), 69–81Google Scholar; and various pages; Alexandria, Virginia, Outward Foreign Manifests, 1803, Bureau of Customs, Record Group 36, National Archives, Washington, D.C. (hereafter NA).

32 Montgomery, History, 20; Blodget, Economica, 158, 200. On Blodget's various investment schemes, see Cohen, Calculating People, 166–67.

33 Gillingham, Marine Insurance, 86–87; William Wilson & Co. to Andrew Clow & Co., 28 Aug., 11,16 Sept. 1793, Andrew Clow Business Correspondence, 1784–1796, Claude Unger Collection, HSP.

34 James Taylor and Robert B. Jameson to William Crammond and John Leamy, 16 Dec. 1793, 6 Jan. and 16 May 1794, Clow Business Correspondence, HSP; Andrew Clow to David Maitland, 1 Aug. 1793, Andrew Clow & Co. Papers, 1784–1836, Hagley Museum and Library, Wilmington, Del.

35 Shoemaker and Berrett Insurance Policies, 1796–1797, HSP; Ruwell, Eighteenth-Century Capitalism, 73–74. In all, Shoemaker and Berrett wrote 166 policies worth over $130,000 between 1796 and 1798 (the collection is misdated). Thus, the Virginia policies represented just over 2.4 percent of the total policies written. In contrast, the seventy-six Virginia policies written by the Insurance Company of North America represented 5.5 percent of the 1,390 policies written by the company between 1792 and 1797.

36 13 Dec. 1797, Alexandria City Legislative Petitions, 1778–1809, Library of Virginia, Richmond, Virginia (hereafter LV); Alexandria Advertiser, 13 Sept. 1797.

37 Shepherd, , Statutes at Large, vol. 2, pp. 89–92Google Scholar; Alexandria Advertiser, 13 Dec. 1797, 20 Jan. 1798. The act was also published in the newspaper on 8 Feb. 1798. On the establishment of banks in Alexandria, see Crothers, “Banks and Economic Development.” On the question of when limited liability was extended to the shareholders of chartered companies, see Perkins, Edwin J., American Public Finance and Financial Services, 1700–1815 (Columbus, 1989), 116–17, 373–76Google Scholar, who concludes that most early corporations lacked “de jure” legal protection until the 1820s, but “de facto, American investors” were rarely “exposed to … personal liability.” Ship owners who borrowed money upon “bottomry and respondentia” used the value of their ship (bottomry) or its contents (respondentia) as security for the repayment of the money; see Chorley, Lord of Kendal, Arnould on the Law of Marine Insurance and Average, 2 vols., 14th ed. (London, 1954), vol. 1, nos. 242–43, 289–90Google Scholar.

38 Alexandria Advertiser, 8 Feb., 20 Mar. 1798; Columbian Mirror and Alexandria Gazette, 22 May 1798. The thirteen Alexandria directors were William Wilson, William Hartshorne, William Hodgson, James Patton, Richard Conway, William Herbert, John Potts, James Kennedy, George Taylor, James Dykes, Thomas Porter, Thomas Williams, and Thomas Gill. All were among the economic and political elite of Alexandria, and all but Hartshorne and Taylor, who were Quakers, owned slaves; for information on each, see Miller, , Artisans and Merchants, vol. l, pp. 78, 121, 160, 191–93, 201–2, 208–9, 249Google Scholar; vol. 2, pp. 22–23, 41, 47, 174, 256, 260–61. The Fredericksburg director was Robert Patton, and the Richmond director, John Hopkins. On the creation of the Alexandria coffeehouse, see Alexandria Advertiser, 13, 15 Nov. 1797; and Crothers, A. Glenn, “Public Culture and Economic Liberalism in Post-Revolutionary Northern Virginia,” Canadian Review of American Studies 29, no. 3 (1999): 61–90CrossRefGoogle Scholar. On the Virginia Marine Insurance Company, see Shepherd, , Statutes at Large, vol. 3, pp. 130–35Google Scholar.

39 Crothers, “Projecting Spirit,” 35–37, 103–67, 310–72,499; Crothers, A. Glenn, “Quaker Merchants and Slavery in Early National Alexandria, Virginia: The Ordeal of William Hartshorne,” Journal of the Early Republic 25 (Spring 2005): 47–77CrossRefGoogle Scholar. The shared commitment to the region's economic development is best seen in the large number of individuals who invested, like Hartshorne, in a variety of the region's incorporated companies. Merchant and slaveholder William Herbert, for example, was a director of both the Marine Insurance Company and the Bank of Alexandria, as were William Wilson and William Hodgson. John Potts was a director of the Marine Insurance Company and the Potomac River Company, and Richard Conway was involved in all three corporations.

40 Reports of dividends: Alexandria Advertiser & District of Columbia Daily Advertiser, 1 Jan. 1799; Times; & District of Columbia Daily Advertiser, 3 July 1799, 2 Feb., and 2 July 1801, 4 Jan. 1802; Alexandria Advertiser and Commercial Intelligencer, 5 July 1803; and Alexandria Daily Advertiser, 3 Jan. 1804. For the return on Bank of Alexandria stock, see Crothers, “Banks and Economic Development,” 17–19.

41 Reports of sales: Alexandria Advertiser and Commercial Intelligencer, 19 Aug. 1801 (William J. Hall), 23 Jan., 1 July 1802 (William Hodgson); Alexandria Daily Advertiser, 6 Nov. 1804 (Henry and Alexander Moore), 28 Aug. 1805 (P. G. Marsteller), and 10 Dec. 1805 (James Kennedy). Charles Lee to William Ludwell Lee, 4 Apr. 1797, Edmund Jennings Lee Papers, 1753–1904, Virginia Historical Society, Richmond, Va. (hereafter VHS); George Carter to Dr. John Arnest, 25 June 1815, Carter to David Winchester, 5 Feb. 1819, Carter to Thomas Maund, 5 Feb. 1819, all in George Carter Letterbook, 1807–19, VHS; Blodget, Economica, 200; see also James, Biography of a Business, 17; and Ruwell, Eighteenth-Century Capitalism, 26–27, 111. St. George Tucker, the Virginia jurist, also invested heavily in Alexandria financial stock; see Hamilton, Tuckers of Virginia, 80, 83,108–9.

42 French Spoliation Claims, Alexandria, Virginia, Outward Foreign Manifests, 1797, 1799, 1800, Bureau of the Customs, Record Group 36, NA; Columbian Mirror and Alexandria Gazette, 26 Sept. 1799.

43 Hodgson's dispute with the company can be followed in the following cases, cited in Cranch, William, Reports of Cases Argued and Adjudged in the Supreme Court of the United States, 1801–1815, 9 vols. (Washington, D.C., 1804–1817Google Scholar): Hodgson v. The Marine Insurance Company of Alexandria, vol. 1, p. 460 (1807)Google Scholar; Hodgson v. The Marine Insurance Company of Alexandria, vol. 5, p. 100 (quote 107) (1809)Google Scholar; The Marine Insurance Company of Alexandria v. Hodgson, vol. 6, p. 206 (1810)Google Scholar; and The Marine Insurance Company of Alexandria v. Hodgson, vol. 7, p. 332 (1813)Google Scholar. Unfortunately, the court cases provide no indication of how this ongoing internal dispute—Hodgson was a director—affected the operations of the company.

44 Marine Insurance Company of Alexandria: Insurance Policies, 18 May 1807–8 Nov. 1810, VHS. The exact total of claims paid is uncertain because two of them do not specify the amounts paid to the policyholder.

45 Report of the Secretary of State, French Spoliations: The Papers on File in the Department of State Concerning the Unpaid Claims of Citizens of the U.S. Against France for Spoliations Prior to July 31, 1801 … (Washington, 1886), 27, 42, 49, 52–53, 63, 66, 68, 72, 83, 91, 96, 97, 108, no, 117, 119, 122, 126, 127, 139, 143–47, 158–59, 163, 164, 174–75, 177. 180, 183–85, 193, 204Google Scholar. For the history of these claims, see King, George A., “The French Spoliations Claims,” American Journal of International Law 6 (Apr., July, Oct. 1912): 359–80, 629–49, 830–57CrossRefGoogle Scholar.

46 The five vessels were the schooners Welcome Return, Neptune, and Mount Vernon, and the ships Felicity and Hannah; see Columbian Mirror and Alexandria Gazette, 21 June 1798; 10 Jan., 14 and 23 May, 16 and 26 Nov. 1799. The arming of merchant ships could be an effective strategy. As Richard Buel writes, “Any armament, no matter how small, diminished the chance of being taken, because enemy cruisers came in all sizes.” However, merchants who opted to place weapons on their vessels did so at the expense of cargo space, thereby lessening the value of each voyage; see Buel, In Irons, 100.

47 Marine Insurance Company of Alexandria: Insurance Policies, VHS. The two policies (nos. 2036 and 2039), written to cover voyages between Alexandria and the Caribbean, appear to have been in clear violation of the embargo. The embargo was in effect between 22 Dec. 1807 and 15 Mar. 1809; see Malone, Dumas, Jefferson the President: Second Term, 1805–1809 (Boston, 1974), 469–90, 561–82, 641–57Google Scholar.

48 Marine Insurance Company of Alexandria: Insurance Policies, VHS.

49 Ibid. On the economic and urban development of northern Virginia in the early national period, see Crothers, “Projecting Spirit,” esp. 232–309.

50 Bodenhorn, Howard, A History of Banking in Antebellum America: Financial Markets and Economic Development in an Era of Nation-Building (New York, 2000), 213–14Google Scholar and various pages; Wright, Robert E., Origins of Commercial Banking in America, 1750–1800 (Lanham, Md., 2001Google Scholar); Perkins, American Public Finance, 1–10, 106–36, 266–81; Engberg, Holger L., “Capital Formation and Economic Development: The Role of Financial Institutions and Markets,” in Wasow, Bernard and Hill, Raymond D., eds., The Insurance Industry in Economic Development (New York, 1986), 107–19Google Scholar; Kross, Herman E. and Blyn, Martin R., A History of Financial Intermediaries (New York, 1971), 3–9Google Scholar. For more detailed studies of the role of banks and financial intermediation in economic development in the United States between 1780 and 1860, see Sylla, Richard E., “U.S. Securities Markets and the Banking System, 1790–1840,” Federal Reserve Bank of St. Louis Review 80 (May/June 1998): 83–98Google Scholar; Wright, , “Banking and Politics in New York, 1784–1829” (Ph.D. diss., State University of New York at Buffalo, 1997)Google Scholar; and Crothers, “Banks and Economic Development.”

51 Alexandria City Petition, 13 Dec. 1797, LV; Shepherd, , Statutes at Large, vol. 2, pp. 89–92Google Scholar; vol. 3, pp. 130–35. For the practice of deducting the premium from claims paid, see Policy No. 2014, Marine Insurance Company of Alexandria: Insurance Policies, VHS.

52 Shepherd, , Laws of Virginia, vol. 2, p. 91Google Scholar; vol. 3, p. 132. By investing in bank stock, Virginia insurance companies were once more emulating their peers to the north; such investments were extremely common among all early national marine insurance companies; see Ruwell, Eighteenth-Century Capitalism, 106. On the interlocking the directorates, see The Times; & District of Columbia Daily Advertiser, 20 and 21 Jan. 1800, which reported the election of new directors to both the Bank of Alexandria and the marine insurance company. Six of the latter firm's directors—Richard Conway, John Dunlap, William Herbert, John Janney, J. T. Ricketts, and Jonah Thompson—were also directors of the bank. This, too, was a common practice in antebellum American banking, at least in New England; see Lamoreaux, Naomi R., “Banks, Kinship, and Economic Development: The New England Case,” Journal of Economic History 46 (Sept. 1986): 647–68CrossRefGoogle Scholar. On the Bank of Potomac, see Crothers, “Banks and Economic Development,” 32–38.

53 Alexandria Advertiser and Commercial Intelligencer, 23 Jan. 1802 (Henry Moore); Alexandria Daily Advertiser, 22 Sept., 12 Oct., 5 Dec. 1803 (William Groverman).

54 Shepherd, , Laws of Virginia, vol. 2, p. 92Google Scholar; vol. 3, p. 133; Ruwell, Eighteenth-Century Capitalism, 116–17.

55 Davis, , History of American Corporations, vol. 2, pp. 334–35Google Scholar; Orders for Marine Insurance, 1809–1817, HSP; Ruwell, Eighteenth-Century Capitalism, 104,118; Blodget, Economica, 64.

56 Marryat, Observations (appendix), 11–12, 13, 14–15, 24–25.