Crowdfunding Common Security: The Creation of Collective Insurance Funds in the Early Republic

On June 26, 1752, long before signing the Declaration of Independence, Benjamin Franklin signed two insurance policies. He purchased them from the Philadelphia Contributionship for the Insurance of Houses from Loss by Fire, a company he had helped to found and that was the first of its kind in North America. According to its founding document, the company was dedicated not only to the founders’ “own mutual security” but also “the common security and advantage of our citizens and neighbors, and for the promoting of great and public good … apart from private or separate gain or interest.”

Often framed as a business that reconciled self-interest with altruistic concerns, several hundred insurance companies mushroomed all across the thirteen founding colonies of the United States in the early republic era. While their respective understandings of what was at risk for individuals or company owners varied, they all began their operation with collecting pools of money that others had at their disposal. Between 1792 and 1806, American insurance companies were able to increase their total accumulated capital from USD 600,000 to USD 15,000,000 (Ruwell, 1993) this way.

Historians have acknowledged the provision of funds to capitalize insurance companies primarily as a critical service for the development of the early American economy. According to these arguments, the money pools that insurers had at their disposal to pay indemnifications to customers or to reinvest on the stock market made the institutions relevant as financial intermediaries. This paper aims to reverse this perspective by closely analyzing by whom, why, and in what ways these cash pools were created. By tracing where the money came from, this paper seeks to uncover the community of its providers and the communities to which they hoped to pledge allegiance by crowdfunding “common security.”