Learning how to manage risk by hedging: the VOC insurance contract of 1613

Oscar Gelderblom, Abe De Jong, Joost Jonker

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We examine an unusual contract which the Dutch East India Company (VOC) sold to investors in 1613. The firm was in a position as modelled by Froot, Scharfstein and Stein for modern corporations: Facing heavy, strategic investment, about to reap the benefits, but unable to attract the necessary capital. Hedging or insurance then makes sense to safeguard continued operations. Understanding this, the VOC directors took out insurance on incoming cash from return cargoes. We analyze the contract's price and underwriters and contrast the VOC's single use of this peculiar instrument with the English East India Company's later repeated application.

Original languageEnglish
Pages (from-to)332-355
Number of pages24
JournalEuropean Review of Economic History
Issue number2
Publication statusPublished - May 2020

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