Page 16 - M1_Insurance Introduction Notes
P. 16
Founding reinsurers, rather than just founding
additional insurance companies, proved to be an
efficient way of providing additional risk capital.
Reinsurers were comparatively inexpensive to set up
and run, not needing the large sales force of direct
insurers. Also, reinsurers started spreading risks more
broadly than their clients. They tended to be more
international, for one thing, and they were active in
most or all lines of business known at the time, which
allowed offsetting losses in one line with gains in
another.
Risk assessment outside the Life and Health
business was virtually non-existent in those days.
Reinsurers had to rely on the word of their clients or
brokers and apply the famous “uberrima fides” or
utmost good faith principle.
16
