Probability and Life Contingencies, 1650-1750: The First One Hundred Years
Coming at the end of the Renaissance period and some 100 years after the Reformation, the mid-seventeenth century is generally regarded by historians as part of the early modern epoch. We should not, however, infer from this label that for Britain it was a time of stability in its political institutions or sophistication in its financial institutions. England spent the middle of the seventeenth century at war with the Netherlands, Scotland, Ireland and itself. The country recovered quickly from the tyranny of Cromwell’s Commonwealth; the arrival of King William III from the Netherlands in 1689 brought peace with the Netherlands but still more wars in Europe, this time with France. In the second half of the seventeenth century, England lagged behind some of northern Europe, and most notably the Netherlands, in the sophistication of its financial systems. King William imported Dutch practices in the raising of long-term government funding, and his costly wars had much use for them.
Marine insurance was a well-established commercial activity in England and continental Europe by 1650. European trade and early colonisation created demand for the pooling or transfer of the risks associated with the transportation of valuable goods over long distances by sea. In contrast, very little life assurance business was conducted at this time. There were no significant financial institutions in England in 1650 that existed for the primary purpose of providing life assurance. The economy was predominantly agricultural. The industrial revolution and the professional middle class that it would foster were over a century away. Life assurance as insurance for a family’s loss of a breadwinner’s future salaried income was a concept whose time had not yet come.
© The Author(s) 2017
C. Turnbull, A History of British Actuarial Thought, DOI 10.1007/978-3-319-33183-6_1
This was also the midst of what is sometimes called the Scientific Revolution—the era of Galileo, Newton and Leibnitz. This title reflects the exceptional intellectual progress that occurred in the seventeenth century, which saw the development of the scientific method and the ‘mathematisa- tion of nature’. Intellectual progress in the fields of probability and life contingencies up to 1650 had been rudimentary. These disciplines, however, both now started to attract some of the greatest mathematical and scientific minds of this period of remarkable intellectual progress. The initial seeds of development in each of these fields were planted side by side and followed strikingly contemporaneous paths of growth over the next 100 years. The pricing of life contingencies emerged as one of the most relevant empirical applications of the evolving ideas of probability and statistics during this era and some of probability’s leading figures actively applied these new concepts to the similarly nascent field of the pricing of life contingencies.