Life Insurance

Germany's Risk Pioneer

Ernst-Wilhelm Arnoldi  was head and shoulders above the competition in Gotha. Source: imago
Ernst-Wilhelm Arnoldi was head and shoulders above the competition in Gotha.
  • Why it matters

    Why it matters

    One of German business’ seminal moments, the birth of life insurance, was brought about by a relentless entrepreneur and a feeble-minded aristocrat.

  • Facts


    Mr. Arnoldi used a trick when he started in the insurance business, so it looked like he had more clients.

    He set up his business in Gotha, Thuringia, founding the predecessor of present-day German insurer Gothaer.

    With a fondness for poetry, Mr. Arnoldi met his contemporary Johann Wolfgang von Goethe.

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On that fateful night, Ernst-Wilhelm Arnoldi sat again in his room racking his brains, as he had so often in the previous years. He felt it working within him, urging him on, he felt this feeling of built-up energy that only those people bursting with ideas know. He knew he must succeed in convincing people.

The idea that he carried with him was truly that irresistible: With industrialization in full swing and businesses becoming bigger and bigger, he wanted to insure the businesses, first for damages from fire, then from other risks.

Mr. Arnoldi knew that the small mutual societies that people had used for a few centuries to insure their activities from risk were no longer enough.

A broader basis was needed: if many people from the entire country regularly paid their premiums for such an insurance, then this could be enough to cover even major damages for industrial firms, which were also finding their way into his home state of Thuringia. Mr. Arnoldi had spent the previous weeks spreading the idea with the local businesses and bourgeoisie from Hof to his hometown of Gotha.

It soon became clear to him that people only trusted him if as many people as possible also trusted him. Only then did they have the certainty that the contributions paid to Mr. Arnoldi’s company would give it enough of a financial cushion to be able to pay in the event of damages. Therefore, there needed to be enough people at the beginning to take the first step.

It was December 31, 1820, and time was pressing.

Mr. Arnoldi, with sideburns, thinning hair, and a piercing gaze, had started his insurance business full of optimism half a year before, on July 2, 1820 in Gotha. He wrote in its charter: “The bank only comes into full effect as soon as the amount of the insurance policies reaches 4 million taler.” He had expected he would have collected a larger amount by January 1, 1821.

Mr. Arnoldi knew that in order for his “Insurance for Germany” to become a reality, the patchwork of German territory must become a unified economic entity.

But it was then the end of the December 1820, and the applications of those whose insurance was to begin only amounted to 2.8 million taler. If he did not change something fast, he entire plan would be over. If those who signed up were to notice that not enough policies had been sold, they would likely become wary, and pull back from their commitments.

So he started the numbering for the policies that he would give out the following day with the number 101, instead of number “1.” His calculation was that the policyholders would then think that they are members of a larger risk-bearing community. His hand shook as he made the change, but nevertheless the trick worked.

A few weeks later, Mr. Arnoldi’s fire insurance bank was insuring several hundred customers. Some competitors got a whiff of the trick and cried foul play. But Mr. Arnoldi’s calculation paid off: as soon as there was a critical mass, there was no going back. By the end of 1821 the insurance policies totaled 18.6 million taler.

And Mr. Arnoldi knew that his fundamental idea worked. He brought to fruition a principle for the first time in Germany that had already been somewhat successful throughout the British Empire, but which had no peer in fragmented Germany: a large version of the mutual society with a national character, which touched upon the entire German economy.

Mr. Arnoldi was only 32 years old at the time. And he was firmly convinced that the risks are best protected when as many people as possible pay small amounts into a fund, in order to cover for another insured person during an emergency. And there were numerous risks: fire, theft, damages to machinery, health, and yes, even life.

Those days, while his wife was raising their four children, the idea came to him in the Guild Hall in Gotha. He had founded a club, which regularly met there. One purpose of the club was that he wanted to persuade the merchants in Gotha to engage in the idea of an “insurance bank,” which he called the business model.

The paint factory near Remstedt and the stoneware factory near Ilmenau, which his father had left him in 1813, had long no longer been used to capacity. Mr. Arnoldi liked to write poetry in his free time, and met with a certain Johann Wolfgang von Goethe from Weimar, which was not far away. For a while, in addition to the poetry, he had used his energy to build up an export business for sending products from Thuringia to the international ports in Holland. But this type of traditional trade had quickly bored him.

Instead, he challenged himself with the question of how one could secure the growing volume of business against increasing risks.

The example he used was the English fire insurers, which were quickly expanding into continental Europe, notably the Phoenix Assurance Company, which already opened its first branch in Hamburg in 1786. Because it was based on a private initiative, it was very realistic in its calculations and assessed possible risks for their insurability. The premiums required were based on their level of risk and on the current business experiences.

Mr. Arnoldi himself was a customer there, and therefore almost looked at the business model from the inside. Because the British, with their dominant position, continued raising the premiums, Mr. Arnoldi suspected that opening up such an insurance bank could possibly be more lucrative for his business. He drafted a position paper, and it was signed by 16 merchants in Gotha on October 1, 1819.

The city of Gotha was conveniently located. The ducal administration was less bureaucratic than other German territories, and there were no special duties on insurance in Gotha. Within a short period of time, 118 merchants and businesses were taking part in the company, ensuring that the management board of the insurance bank met for its inaugural meeting on July 2, 1820.

It was followed by the trick from January 1, 1821, which formed a company from the plan. And Mr. Arnoldi became the head of the first German insurance bank.

Two years went by before Mr. Arnoldi started up his plan to think bigger for the fire insurance bank.

In 1823 Mr. Arnoldi sat down again to compose one of his memorandums with which he regularly roused his contemporaries. He wrote: “The need to protect the family robbed of their head from want, and to free the mind from the agony that comes with the thought of a premature death with uneducated children and the widow’s corresponding lack of assets; this need is so great, so universal and largely actively felt, that there only needs to be encouragement for a life insurance bank, at which each insured is viewed as a shareholder, to obtain an unbelievable sphere of influence.”

Like no other Mr. Arnoldi was able to speak to his fellow citizens from his soul, when he described the perils of daily life with poetry and prose.

In Hamburg, Levin Anton Wilhelm Benecke first tried to insure life in 1806. But the company that resulted had to declare bankruptcy because of the turmoil of war in 1814. Thus, it was his contemporaries who were the most skeptical when Mr. Arnoldi wanted to pursue the idea again. What does this form of insurance offer considering its predecessor was the first to collapse in an emergency?

Mr. Arnoldi campaigned for his idea for two years until he was helped out by a lucky coincidence: Of all people Duke Frederick IV of the House of Saxe-Coburg and Gotha insured his own life with an English insurer. The company, however, did not want to pay at the death of the ruler, arguing that he was feeble-minded, which was not insurable. The ducal court therefore had an interest in not insuring its risks abroad anymore, and called upon Mr. Arnoldi.

Mr. Arnoldi made calculations, worked meticulously, campaigned for the idea, and finally founded his “Life Insurance Bank for Germany” on July 9, 1827. He opened a makeshift office at his home. On January 1, 1829 he had gathered enough capital and the business began.

In addition to his talent for pursuing ideas over years also compatible with his own interests, Mr. Arnoldi distinguished himself in one area: He knew how to campaign for his ideas.

Like no other he was able to speak to his fellow citizens from his soul, when he described the perils of daily life with poetry and prose. He used the access he had to the people for his political and business concerns.

Mr. Arnoldi knew that in order for his “Insurance for Germany” to become a reality, the patchwork quilt of German territory must become a unified economic entity. Only then would there be enough potential customers. In 1817, in the “Allgemeinen Anzeiger,” he wrote an article “A recommendation for a union of German manufacturers.”

If there were to be no political union between the then-38 German states, then he – as well as most merchants and manufacturers – wanted there to at least been a unified, duty-free domestic market. He fought together with Friedrich List for the union of what would become the German Empire in 1871, which he could still only get a sense of in 1834 in the form of falling customs barriers.

Mr. Arnoldi died in 1841 after a long illness. He was 63 years old. His doctors talked about a nervous fever from constant overwork.


Sven Prange heads up Handelsblatt’s Report & Names section. To contact him:

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