The Presbyterian Ministers’ Fund

Colonial America was not awash in corporate entities of any kind; no country was. However, one of the oldest corporations in America, one even older than the Unites States itself, was also among the first life insurance firms in the world. The establishment of the Presbyterian Ministers’ Fund is a significant event in the history of American insurance, particularly life insurance, which was still a novel concept in those days. By virtue of its business model, the company amassed a portfolio that, although hardly very large, was sizable enough to make the company one of the largest institutional investors in Britain’s North American colonies. The firm paid annuities to the widows and children of just a few dozen customers, all Presbyterian ministers.

Fund for Pious Uses

Life insurance had existed for well over a century before the creation of the first life insurance company in America. Other insurance lines, like marine insurance, were even older, dating back to the Middle Ages. By contrast, the first known life insurance policy dates to 16th century England. In 1583, insurance was acquired on the life of a man named William Gibbons by a third person named Richard Martin. The policy was underwritten not by an insurance company but by sixteen individual underwriters. Perhaps the first insurance company was established in England in 1705; it was called the Amicable Society for a Perpetual Assurance Office, and served as the inspiration for future firms.

In America, the first life insurance company was incorporated in 1759 as the ‘Corporation for the Relief of Poor and Distressed Presbyterian Ministers and of the Poor and Distressed Widows and Children of Presbyterian Ministers’. The company, the oldest life insurer in America and among its oldest incorporated entities, was later less verbosely renamed the ‘Presbyterian Ministers’ Fund’. Founded in colonial Philadelphia, incorporation was granted by Thomas and Richard Penn, sons of the founder of the Province of Pennsylvania William Penn, and then proprietors of the entire province. The company’s path crossed with that of other leading colonial figures; the American publisher, polymath, and later founding father, Benjamin Franklin provided printing services to the corporation.

Though formally incorporated as an insurance firm in the 1750s, the company truly began more than four decades earlier, in 1717, as the ‘Fund for Pious Uses’. Founded by the Presbyterian Synods in Philadelphia and New York, the fund was to provide for the widows and children of missionaries and fund educational, missionary, and charitable activities. The Presbyterians of Philadelphia were led by Jedediah Andrews, who served as the fund’s first Treasurer and helped to raise money for it by annual contributions collected at congregational meetings and gifts from wealthy individuals. After incorporation, further funds were raised in Britain to secure the company’s first formal policies.

Annuities

The Fund for Pious Uses did provide annuities to the widows and children of Presbyterian ministers. The first was provided for seventeen years starting in 1719 to the widow of a certain John Wilson. However, it was following incorporation in 1759 that policies were formalized. From then on, they were arranged not on the basis of charity but on the basis of a financial transaction where the customer would pay premiums to gain insurance that would provide an income for their dependents. One of these early insured men was Francis Alison, a minister and the founder of the school that went on to become the University of Delaware. The company’s future headquarters on Walnut Street in Philadelphia was named after him. Some other leading citizens in Presbyterian America went on to be customers or servants of the company.

Over the entrance to the Alison Building, the early 20th century headquarters of the Presbyterian Ministers’ Fund in Philadelphia

Indeed, Presbyterian ministers were the company’s only customers in its first decades in operation. Under its typical policy, ministers or their congregations paid between £2 and £7 a year to provide the ministers’ widows and children with an annuity that would pay upon their death. New customers did not need a medical examination, though it was possible to be rejected for health reasons. Twenty-one ministers formed the first set of customers; they received what were likely the first formal life insurance policies in America.

Growth was slow. Many early customers let their policies lapse and there were few new customers each year. Between 1763 and 1789, only thirty-six ministers had signed up for insurance, fewer than two per year. Indeed, in its early days, the company frequently received more in donations than it collected in premiums. To grow further, the Presbyterian Ministers’ Fund even considered extending insurance to lay persons but this proposal went no further.

Investments

As with any other insurance company, investment was a critical function of the Presbyterian Ministers’ Fund. The capital it accumulated by its premium revenue was invested in loans. Even the preceding Fund for Pious Uses, which was more charity than company, lent money, albeit interest free. For example, the old Fund lent £30 to a congregation at Wilmington, Delaware in 1741 so that they could erect a meeting house. However, the Fund for Pious Uses had only a small portfolio, possessing just under £600 in assets in 1739. Following incorporation, further fundraising in Britain added at least £3,800 to its assets. This money was mostly invested in mortgages and personal loans. However, regardless of the level of security provided by the loan, the company was barred from charging more than 6% in interest, the legal limit in Pennsylvania at the time.

As one of the few institutional investors in colonial America, the company was of some financial importance, no matter how small. Voluntary associations and novel entities like the Presbyterian Ministers’ Fund were among the few sources of loans in the coinage and credit deprived North American colonies. The company served as something of a bank to the professional classes it lent to, especially for those who might not have had land to borrow against, giving them few other potential avenues to turn to for credit.

The company even made loans to the rebels during the American Revolution, lending £5,000 to the Continental Congress in 1777. In latter centuries, it went on to purchase bonds of the Union government during the Civil War and American war bonds during the First World War. However, in its early days, the company was most known for its willingness to make loans for far smaller sums, sometimes for less than £100, many taking the form of simple unsecured loans to individuals. With respect to these unsecured loans, the company not infrequently resorted to lawsuits to recover on those that turned sour, suggesting it was not the most successful lender. Records report that of the 117 loans made by the company between 1761 and 1776, no fewer than six resulted in lawsuits.

Money was also spent on peculiar non-investment items. In 1763, the company paid the ransom demanded by an Indian tribe for the freeing of hostages. It is unclear whether the hostages were policyholders or members of their families.

Life Insurance in America

Life insurance was a small business in America, at least until the mid-19th century. Significant steps in the development of the industry occurred earlier; mortality tables were published in America in 1789 and a few other life insurance companies were founded in the 18th century. However, they each found little success prior to 1830. That changed with the formation of new mutual insurance companies and new state regulations that, among other things, allowed the payout of insurance benefits to bypass the probate process in estate law. This put insurance benefits beyond the reach of creditors and gave beneficiaries more security.

With these developments, policies in force grew from just $300,000 in 1830 and almost $5 million in 1840 to just under $100 million by 1850. Growth also came by developing policies that appealed to a wider array of potential buyers. Life insurance in the second half of the 19th century was increasingly marketed towards the working classes. This was done through fraternal associations offering insurance to their members and by ‘industrial’ life insurance companies offering lower value policies to the masses without the need for medical examinations. By 1900, insurance policies in force grew to almost $14 billion.

The Presbyterian Ministers’ Fund had grown as well. It had also managed to remain independent for more than two centuries from its incorporation. By 1980, the company had $2 billion in policies in force. It had also since changed its name to the Covenant Life Insurance Company having expanded outside the Presbyterian church. Nonetheless, it still focused on the religious. The company also continued to operate independently until it was acquired in the mid-1990s; today, what’s left of the Fund for Pious Uses forms part of the insurance group Nationwide.

Lesson

Prior to 1830, the life insurance business in America was miniscule. However, the oldest company in the business, the Presbyterian Ministers’ Fund, was nonetheless significant to the financial history of the country. In the days when few corporations existed, and even fewer with the resources to lend in the country’s nascent capital markets, the Presbyterian Ministers’ Fund was, despite its tiny portfolio, one the largest investors in colonial America. This gave the company outsized importance in the credit starved economy even though its actual product, life insurance, was a bit ahead of its time.

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