The system worked as follows. The owner of a vessel would take out a loan on the ‘bottom’ or hull of the ship. If the ship returned safely, the loan was repayable with a premium. If the ship was lost at sea, the loan was extinguished, and the money could be used to buy or construct a replacement vessel.
Respondentia was much the same, except that it was the cargo rather than the hull which was insured.
A similar form of insurance was used by Arab maritime traders a thousand years ago, despite the Islamic ban on aleatory contracts, no doubt because it could be construed as paying for a share in the proceeds of a successful voyage, rather than betting on a risk. One could argue that such a contract is still in effect aleatory, but Maxime Rodinson in his book Islam & Capitalism has shown how Muslim jurisprudents found quite jesuitical ways around such prohibitions. read on
