Encyclopædia Britannica, Ninth Edition/Tontine

TONTINE.This system of life insurance owes its name to Lorenzo Tonti, an Italian banker, born at Naples early in the 17th century, who settled in France about 1650. In 1653 he proposed to Cardinal Mazarin a new scheme he had devised for promoting a public loan. His plan was to the following effect. A total of 1,025,000 livres was to be subscribed in ten portions of 102,500 livres each by ten classes of subscribers, the first class consisting of persons under 7, the second of persons above 7 and under 14, and so on to the tenth, which consisted of persons between 63 and 70. The whole annual fund of each class was to be regularly divided among the survivors of that class, and on the death of the last individual the capital was to fall to the state. This plan of operations was authorized under the name of "tontine royale" by a royal edict, but this the parlement refused to register, and the idea remained in abeyance till 1689, when it was revived by Louis XIV., who established a tontine of 1,400,000 livres divided into fourteen classes of 100,000 livres each, the subscription being 300 livres. Although the classes were not quite filled, this tontine was carried on till 1726, when the last beneficiary died, a widow who at the time of her decease was deriving from this source an annual income of 73,500 livres. Several other Government tontines were afterwards set on foot; but in 1763 restrictions were introduced, and in 1770 all tontines at the time in existence were wound up. Private tontines continued, however, to flourish in France for some years, the "tontine Lafarge " having been opened as late as 1791.

The tontine principle has often been applied in Great Britain, chiefly to the purchase of estates or the erection of buildings for which the necessary funds could not be procured by ordinary methods. The speculative element in the system has proved an attraction. The investor stakes his money on the chance of his own life or the life of his nominee enduring for a longer period than the other lives involved in the speculation, in which case he expects to win a large prize. The only thing which will serve to distinguish this from an ordinary lottery is the assumption that some may apply greater care or skill in the selection of lives than others of the players. The tontine principle is nearly the converse of ordinary life assurance, where it is the man who dies early who obtains an advantage for his heirs at the expense of the long liver. But it has been occasionally introduced into life assurance in the distribution of profits or surplus, and so far it tends to redress the inequalities of the original contract, the profits being assigned to the longest livers to a larger extent than in the common life assurance system. The tontine principle has been brought into considerable prominence by some American life offices (see Insurance, vol. xiii. p. 183). All that is wanted to make the system fair is that every one should understand that in order to secure a dis proportionate share of profits in the event of his surviving and keeping up his policy he must make a corresponding sacrifice if he dies early or discontinues his insurance.