This is the oldest form of insurance which was for many years transacted at the Lloyds coffee house. The earliest forms of insurance contracts were known as remissions or loons on Bottomy or Bills of Obligations. A merchant could borrow money either by a public subscription or privately for the purpose of purchase of goods or shipment and the amount was payable at fixed rate of interest if the cargo arrive safely and nothing was payable in the event of loss. This system of insurance imposed a heavy burden on lenders and was unsatisfactory for commercial purpose.
In marine insurance, the practice was that a merchant wishing to insure would pass a slip of paper on which the particulars of the ship and its cargo were written to people desirous of providing insurance and those willing to accept a portion of the risk thereof, would initial the slip when the entire amount of insurance was underwritten, the contract was concluded.
For many years, common law played an insignificant role in the resolution of the disputes relating to insurance. This however changed with the appointment of Lord Manisfield as Chief Justice in the mid 18th century and by the latter half of the century the jurisdiction of courts of an insurance matter had been established.
The principle developed in relation to marine insurance has by and large been applied to other categories of insurance. Medieval insurance was closely associated with banking. Attempts were made during the 13th century to separate the two traders in Venile Geneva where risk was developed. Carrier or bill of lading or as a bond which developed with insurance transaction exclusively. Its mode of operation was that a merchants could say a specific sum of money in advance and the value of the goods in question was payable in the event of lesser destruction.
In 1574, a chamber of insurance was established at the Royal Exchange of London. This was a specialized section devoted to insurance transactions and by 1575 insurance contracts had been standardized and subject to resign. These developments were necessary to discourage fraudulent practices by insurers with insecure financial base.
The chamber of insurance and the raging insurance policies registered in Act of 1601. this statute created a special court to adjudicate insurance matters because by statute and an insurance was underwritten by individuals at the Lloyds of London. The South Sea Bubble scan of 1720 revealed the dangers of an unregulated business and this led to the enactment of the South Sea Bubble Act. It also led to the incorporation of two insurance companies i.e. the Royal Exchange Assurance Corporation or Marine insurance and the London Assurance Corporation.
The London Fire Assurance Company was the 3rd company and was incorporated in 1772 after the great London fire. Since then significant attempts have been made to regulate the insurance industry by legislation i.e. by the passage of the Marine Insurance Act of 1746 and the Life Assurance Act 1774. These developments led to the codification of Marine Insurance Act 1906.