The Event That Led To The Develoment Of The Modern Insurance In The Ottoman Empire: The Great Fire Of Pera

How Did the Insurance Practices Begin?

As is known, insurance activities date back to Babylon, 4000 years ago. The content of the first insurance practice, seen in the Code of Hammurabi, was the relations between merchants whose caravans may get damaged and their investors. 
Premium-based insurance started to be applied in Italian port cities in AD 1200, and in 1347, the first modern insurance policy was issued for the ship Santa Clara, which was on its way from the Port of Genoa to the port of Majorca, and insurance in the modern sense began following this event.

Why did this practice arrive in the Ottoman Empire so late?

There were already certain risk-sharing mechanisms in the Ottoman Empire for many years. The bodies such as Avariz Foundations, established for the people who had difficulty paying their taxes, and the Artisan Funds formed in the Artisan Guilds were risk-sharing systems. The main reasons for the insurance activities, which started in the 13th century in Europe, to start in the 18th Ottoman Empire can be listed as the more unsystematic nature of the maritime trade in the Ottoman Empire compared to Europe, the economic situation of the country and the inability to reach a consensus on insurance in Islamic Law. 

The Event That Led to the Development of the Modern Insurance in the Ottoman Empire: The Great Fire of Pera

Even though it is known that insurance activities started in the field of transportation insurance in the Ottoman Empire, the beginning of the developments in fire insurance is the Great Fire of Pera of 1870.
According to the report prepared by the Sun Insurance Company, which continued its activities within the Ottoman borders in those years, the fire broke out from a house in Valideçeşme and soon affected the whole region. According to the same report, approximately 7000 houses were burned in the region. It was reported that 75% of the houses were made of wood and the cost of the fire to the city was estimated at 50 million francs. Of this amount, only 170,000 francs were insured and four British insurance companies paid for damages.
Let alone the material damage, the fire took many lives, and compensation payments were made to the heirs of those who had life insurance. The striking factor here is that all policyholders were non-Muslims. Compensation for the losses of insurance policyholders has been discussed among the public and led to the creation of awareness. Afterward, the work on insurance gained momentum, religious scholars also participated in these works, and a consensus was reached on which insurance products would be authorized in which situations, and the Muslim society began to issue insurance policies.

A Market Is Forming With the Genuine and Fake Ones: The Insurance Sector! 

In the last quarter of the 19th century, approximately 50 insurance agencies were operating within the borders of the Ottoman Empire. Seeing the public's interest in insurance, the fraudsters established fake insurance agencies and started collecting premiums by issuing fake policies. These fake agencies, which easily collect premiums due to the lack of audit activities, disappeared with the premiums they collected over time and many people became victims. In the amendments made in the Commercial Code in 1898, provisions regarding the auditing of activities were added and auditing activities started. Domestic and foreign capital insurance agencies operating have established an association and even prepared a common fire tariff. 
As a result of these developments, the first domestic insurance company, Ottoman Umum Insurance, was established by the Ottoman Bank, Tobacco Regiment, and Duyun-u Umumiye administration, whose capital was owned by foreigners, and its management was predominantly French. Actually, it was a Turkish company, but its capital and management were foreign. Tobacco Regime and Ottoman Bank branches  carried out their agency activities. 

Conclusion

A disaster paved the way for the development of a system that makes it easier to heal the wound of subsequent disasters. 
In the insurance sector, this situation has progressed and developed in the same way in every period. For instance, cyber risks that emerged following the internet age began to be covered by insurance. Insurance products will definitely be prepared for all risks that may arise over time.

Tarkan Bozkurt – Salih Erbaş