The VOC Insurance Contract of 1613

This paper analyses an insurance contract of the Dutch East India Company (Verenigde Oost-Indische Compagnie, VOC) initiated in 1613. As this contract is an early example of risk management, we try to understand its motivation from recent insights in risk management theory of Froot, Scharfstein and Stein (The Journal of Finance 48, 1993, 1629-1658), in which growth opportunities and costly external financing induce a risk management strategy resembling the VOC contract. We describe that the contract aimed at securing the VOC’s continuation and growth and refute alternative explanations, including that the VOC managers initiated the contract out of self-interest or that the VOC acted as arbitrageur in the insurance market. The authors thank Karen Hollewand for assistance. The authors thank participants of the Economic History Seminar of Pompeu Fabre (Barcelona) and the Fourth(?) Finance and History Workshop in Rotterdam, for helpful comments. Comments welcome at [email protected], [email protected] or [email protected].