From the course: Protecting Profitability by Reducing Financial Risk

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Financing your risk

Financing your risk

From the course: Protecting Profitability by Reducing Financial Risk

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Financing your risk

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- The history of insurance dates back to the 17th century when wealthy business leaders in London would gather in a coffee house to underwrite that trade ships taking cargo from Great Britain to the colonies. These members, also known as lloyds, assured shipowners that if pirates stole their cargo or if the ship were lost at sea, that they would be reimbursed for their loss by payment from the members. Of course, this agreement included payment of a premium for that security. I'm sure that although there may have been some grumbling, the shipowners slept more soundly knowing that their precious cargo was insured. The same concept of financing happens today, and it's most commonly termed as insurance. No organizations in the world, including the most valuable and largest, are able to operate without the security of having the risk transferred to insurance companies. The problems generally arise when the insurance buyer doesn't fully understand what they've financed. The shipowners all…

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