Lorenzo de Tonti (c. 1602 - c. 1684) was a governor of Gaeta, Italy and a Neapolitan banker. He invented the tontine, a form of life insurance.
Around 1650, he and his wife, Isabelle di Lietto, gave birth to their first son, the future explorer Henri de Tonti. Shortly afterwards, Tonti was involved in a revolt against a Spanish viceroy in Naples and had to seek political asylum in France. In Paris, the family gave birth to their second son, Alphonse de Tonty, who later helped establish Detroit, Michigan.
For reasons unknown, Louis XIV had him imprisoned in the Bastille from 1668 to 1675. Around 1684, he died in obscurity of unknown causes.
The basic concept of the tontine is simple. Each investor pays a sum into the tontine. Each investor then receives annual dividends on his capital. As each investor dies, his or her share is reallocated among the surviving investors. This process continues until only one investor survives. Each subscriber receives only dividends; the capital is never paid back.
Louis XIV first made use of tontines in 1689 (after Tonti's death) to fund military operations when he could not otherwise raise the money. The initial subscribers each put in 300 livres, and, unlike most later schemes, this one was run honestly; the last survivor, the widow, Charlotte Barbier, who died in 1726 at the age of 96, received 73,000 livres in her last payment. The British government first issued tontines in 1693 to fund a war against France, part of the Nine Years' War.
Tontines soon caused problems for their issuing governments, as they would increasingly underestimate the longevity of the population. At first, tontine holders included men and women of all ages. However, by the mid-18th century, investors had caught on how to play the system, and it became increasingly common to buy tontines for young children, especially for girls around the age of 5 (since girls lived longer than boys, and by which age they were less at risk of infant mortality). This created the possibility to produce great returns for the holders, but it proved to be quite costly for the governments. As a result, the tontine scheme was eventually abandoned, and as of the mid-1850s, the tontines had been replaced by other investment vehicles such as "penny policies", a predecessor to the 20th-century invention of the pension scheme.
Lorenzo's son Henri de Tonti - "The Father of Arkansas"