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Uncommon Sense

By oieahc · December 12, 2022

2026 and Insurance: A Conversation with Hannah Farber

AcrossAmerica1776books 12 min read

In this installment of interviews with OI Book authors about the Semiquincentennial, Hannah Farber discusses marine insurance—a topic that seems below the surface but that nonetheless had a significant impact on the Revolution and American independence. Her 2021 book, Underwriters of the United States: How Insurance Shaped the American Founding, navigates a cast of financial actors who worked behind the scenes to create American independence and an American economy.

In your introduction, you argue that “marine insurers underwrote the establishment of the United States.” Can you talk about what you mean by that?

Revolutions don’t just need ideas, bravery, and strategy; they also need money to succeed. 

This book is about how the institution of marine underwriting directed financial resources to the cause of American independence. Underwriters hoped to gain money if independence was won, and they accepted the attendant possibility of financial loss. In a variety of ways, they underwrote–or bet on–the rebel colonies, and then on the new United States. They insured American privateer vessels that preyed on the British merchant fleet. They invented the financial processes by which Americans borrowed money to fight the war. They formed corporations that purchased American federal debt, thereby shoring up that debt’s value. And all through the French Revolutionary and Napoleonic Wars, as the republic struggled to prove that it was financially stable, insurers provided security to American commercial shipping, making American merchants prosperous and securing the revenue stream (import taxes) that allowed the federal government to pay its bills. 

Robert Morris has often been called the “Financier of the American Revolution” for his role in acquiring funding to support American efforts during the Revolutionary War. Why would you like us instead to think of him as the “Underwriter of the American Revolution?”

Robert Morris acted as an underwriter in multiple eighteenth-century and modern meanings of the word. He was, literally, a marine underwriter: he was an experienced marine insurer in Philadelphia when the American Revolution broke out. 

But Morris was also an underwriter in the broader sense of someone who acted as the guarantor of a loan, promised to contribute a sum of money for a certain purpose, or placed his own reputation behind a certain venture.

He was deeply, personally invested in the Bank of North America, an institution he created to financially prop up the US federal government. And at the war’s end, when the government came up short of the funds necessary to discharge the soldiers of the Continental Army, Morris issued notes for which he, personally, served as the guarantor. He faced a great deal of criticism during his tenure as superintendent of finance of the United States for putting himself in a position to profit from these kinds of machinations; from his perspective, he was also putting himself in the position to take a devastating loss.

Morris was also involved in underwriting in a very modern sense during the Revolutionary War. Tasked with selling American debt overseas for the first time, Morris arranged for the French and Dutch governments to underwrite the bonds in the modern sense – to take the risk of their nonsale – so that the US could immediately reap their value. 

Underwriters of the United States shows the links between early American corporations—and in particular the charters that governed them—and the structures of American governments. How did corporate charter creation and the process of constitution-making influence one another in the early United States?

Insurance companies were some of the earliest and best-capitalized corporations in the new United States. When Americans began to found them in the 1790s, they were still living in an era when the establishment of a corporation was understood to be a serious constitutional process. 

The ratification of the Federal Constitution and the subsequent funding of the federal debt offered concrete and symbolic security to lenders of capital. The funding of the debt also created a great deal of valuable, interest-bearing securities, which new corporations immediately wanted to buy. Prospective corporate shareholders paid for their shares in federal securities; corporations sought to buy even more of these securities. As a result, the new corporations were quite literally invested in the United States. The financial success of one became the financial success of the other. 

Insurance companies, which needed a lot of capital on hand to indemnify merchants for their losses, bought more government securities than any other type of institution. Their emergence was not without controversy, however: it was evident that they would consolidate American merchants into a powerful institution–a corporation–that could control its own capital, generate its own rules, and absorb large amounts of wealth from a broad swath of the American public. 

In the end, however, insurance companies outlasted their critics. Some opponents were bought off with their own corporations, others were bought in. And insurance could never manage to capture the public’s interest for very long. Public opprobrium moved on to other targets, and American insurance companies, relatively quietly, proliferated.

By the 1840s and 1850s, most of the Revolutionary generation had died, and their sons and daughters sought to reshape their memory for a new era. How did these mid-nineteenth-century Americans think about insurance and merchants as part of the memory of the American Revolution?

By midcentury, Americans had largely settled upon an origin story for their country, one that made them feel good about themselves. This mythology held—as mythologies tend to do—that their country’s founders shared certain ideals, and that those ideals were powerful enough to make Americans fight for independence without any compulsion or pragmatic incentives. This story of the republic’s founding was also useful for writers and politicians who wanted to criticize the culture of their own times, which was (by supposed contrast) avaricious and low-minded. They grouped insurance with banking as one of the elements of the helter-skelter modern world. 

As Underwriters of the United States demonstrates, however, the founding of the United States was not just an idea or a military initiative but also a financial gambit—an informed bet—made by a lot of informed financial actors, including merchants and marine underwriters. They may have believed in American independence, but they were also planning to make money off it.

What lessons do you think the history of insurance has for understanding the American Revolution through the lenses of the history of capitalism and political economy?

Capitalism is organized around the hope of financial gain, which capitalists balance against the risk of financial loss. Marine insurers, as the early modern world’s preeminent experts in quantifying the risk of financial loss, were essential players in the rise of modern capitalism. 

In studying marine insurers, then, we can learn (or relearn some endlessly relearnable) lessons about capitalism: how it pulls governments close sometimes and at other times rejects them; how capitalists use information to navigate financial markets but also to reshape those markets to their advantage; how, in spite of capitalists’ desperation to predict the future, the unpredictability of history itself renders predictions pointless. 

In each interview, we conclude with two questions about how the author sees their work contributing to the project of commemorating America’s 250th.

How does your book change the way we should think about the United States declaring independence in 1776?

The United States declared independence in a crowded, busy, dangerous, information-addicted, and highly avaricious world. A lot depended on the motivations and inclinations of individual financial actors in this world, and a lot depended on what they thought the United States was going to be worth.

What is the one thing you most wish those working on commemorations for America’s 250th would learn from your book?

I don’t think it makes sense to hope that any of the commemorations of America’s founding will draw in the lessons from my book. My book’s not like that. My book is the opposite of that. But I hope that on a day when the planners are feeling fed up with the pageantry, with the hoopla, with the necessity of boiling vast complex stories down to simple sentences, they’ll go home, lie down, put their feet up, and find some enjoyment in the weirder, cynical, and more complex story told in Underwriters of the United States.

Oh, also: they should think about who is funding all these commemorations, and what the funders’ goals are. 

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