Page 15 - M1_Insurance Introduction Notes
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insurance industry towards the second half of the 19th
century. Traditionally, insurers resorted to sharing risks
among each other or reinsuring with other insurers. By
implication if not by design, however, this practice
required competitors to grant each other access to
their books. It also increased the likelihood of
accumulating risks regionally and in certain lines of
business.
One way of avoiding these problems was to seek
reinsurance across national borders. But this again
meant that capital would flow out of national
economies, and capital at the time was a sought-after
commodity needed for keeping up with industrial and
economic development.
Early specialised reinsurance companies such as
Cologne Re or Swiss Re were thus founded to stem the
outflow of capital and strengthen national economies.
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