Regulatory regimes and multinational insurers before 1914

Business History Review

Volumn 82, Issue 1, 2008, Pages 59-86

  Pearson, Robin ^a   Lönnborg, Mikael ^b,c  

^a UNIVERSITY OF HULL   (United Kingdom)

^b SÖDERTÖRN UNIVERSITY   (Sweden)

^c UPPSALA UNIVERSITY   (Sweden)

Author keywords

[No Author keywords available]

Indexed keywords

EID: 46049102602     PISSN: 00076805     EISSN: None     Source Type: Journal    
DOI: 10.1017/s000768050003751x     Document Type: Review

References (121)

1. Worldwide insurance premiums amounted to US$3.4 trillion across 145 countries in 2005. Swiss Re, "World Insurance in 2005," Sigma, no. 5 (2006).
2. Studies of international insurance have been hitherto largely confined to histories of individual companies or national markets. Exceptions include Mira Wilkins, The Emergence of Multinational Enterprise: American Business Abroad from the Colonial Era to 1914 (Cambridge, Mass., 1970);
3. Robin Pearson, "The Development of Reinsurance Markets in Europe during the Nineteenth Century," Journal of European Economic History 24, no. 3 (1995): 557-71;
4. Peter Borscheid, "Vertrauensgewinn und Vertrauensverlust: Das Auslandsgeschäft der deutschen Versicherungswirtschaft 1870-1945," Vierteljahrschrift für Sozial und Wirtschaftsgeschichte 88, no. 4 (2001): 311-45;
5. Kai Umbach, "Die Position deutscher Transport versicherer auf dem Weltmarkt 1880-1914," Vierteljahrschrift für Sozial und Wirtschaftsgeschichte 94, no. 4 (2006): 413-37.
6. See also several of the contributions to Peter Borscheid and Robin Pearson, eds., Internationalisation and Globalisation of the Insurance Industry in the Nineteenth and Twentieth Centuries (Marburg, 2007).
7. Mira Wilkins has shown the way with her analysis of U.S. life-insurance companies abroad before 1914, but there is much more to be done. Wilkins, Emergence of Multinational Enterprise, 65.
8. See her comments in "Multinational Enterprise in Insurance: An Historical Overview," in Internationalisation and Globalisation of the Insurance Industry, eds. Borscheid and Pearson, 4-26.
9. Robin Pearson, "Finance, Insurance," in History of World Trade since 1450, 2 vols., ed. John J. McCusker (Farmington Hills, Mich., 2006), vol.1: 290-91.
10. There were, for example, eleven German transport insurers in Sweden in 1893, fourteen in Austria in 1913, seventeen in Italy in 1912, nineteen in Denmark, and ten in Finland in 1903. In all these countries, native offices accounted for two-thirds or more of premiums by the decade before the First World War. Umbach, "Deutscher Transportversicherer."
11. Clive Trebilcock, Phoenix Assurance, 2 vols. (Cambridge, U.K., 1985, 1998), vol.1: 248-67.
12. Pearson, "Development of Reinsurance Markets."
13. P. G. M. Dickson, The Sun Insurance Office, 1760-1960 (Oxford, 1960), 192.
14. The Sumitomo Marine & Fire Insurance Co., The First Century, 1893-1993 (privately printed, 1993), 12.
15. Trebilcock, Phoenix Assurance, vol.1: 315-16.
16. Mutuals are excluded from this table in order to compare like with like. Almost all foreign entrants were stock companies. In some countries, the number of tiny mutual offices was very large. There were 1,012 "parish" mutual fire-insurance associations in Sweden in 1910, for instance.
17. Spectator (May 1871): 417;
18. Insurance Times (hereafter IT) (Oct. 1883): 608;
19. Rundschau der Versicherungen (hereafter RdV) 13 (1863): 36-38;
20. Vereinsblatt für Deutsches Versicherungswesen (hereafter VDV) 2 (1874);
21. Bengt Bergander, Försäkringsväsendet i Sverige, 1814-1914 (Lund, 1967).
22. Esperanza Frax Rosales and Jesús Matilla Quiza, "Los Seguros en España: 1830-1934," Revista de Historia Económica 14, no. 1 (1996): 183-203.
23. The data on marine insurance must be treated with particular caution. In the age of telegraphy, marine insurance appears to have been highly price elastic, and risks could be relatively easily insured in London by shipowners and merchants where local agents could not offer a competitive premium. Such insurance policies would not appear in national statistics. Umbach, "Deutscher Transportversicherer," 429.
24. Only three of the twenty-one markets moved across this threshold, namely, nonlife insurance in Norway, where the premium share of foreign companies increased from 23 percent in 1868 to 31 percent in 1875; and fire and marine insurance in the United States, as shown in Table 3, where foreign market share rose above the 30 percent mark between 1872 and 1915, sometimes more than once.
25. Trebilcock, Phoenix Assurance, vol.2: 142. According to the U.S. consul in Moscow in 1905, foreign insurance companies could operate under a charter, but few did. A few more operated illegally. U.S. Bureau of Manufactures, Insurance in Foreign Countries, Special Consular Report 38 (Washington, D.C., 1905).
26. Ibid.
27. This question is explored for the United States in a forthcoming book by Robin Pearson, Insuring America: Multinational Insurers in the United States, 1850-1920.
28. Angus Maddison, Dynamic Forces in Capitalist Development (Oxford, 1991), 210;
29. Wilkins, History of Foreign Investment in the United States, 159.
30. Robin Pearson, "British and European Insurance Enterprise in American Markets, 1850-1914," Business and Economic History 26 (Winter 1997): 438-51.
31. Michael Edelstein, "Foreign Investment and Accumulation, 1860-1914," in The Economic History of Britain since 1700, 2nd ed., vol.2, eds. Roderick Floud and Donald N. McCloskey (Cambridge, U.K., 1994), 173-96;
32. Trebilcock, Phoenix Assurance, vol.1: table 5.6; vol. 2: table 2.3.
33. Trebilcock, Phoenix Assurance, vols. 1 and 2; and Pearson, "Reinsurance Markets."
34. Mikael Lönnborg, Internationalisering av svenska försäkringsbolag: Drivkrafter, organisering och utveckling, 1855-1913, Uppsala Studies in Economic History no. 46 (Uppsala, 1999), 158.
35. Trebilcock, Phoenix Assurance, vol. 1: 234-36.
36. One example was the agency of John C. Paige of Boston. By 1880, Paige had two British, two French, and four American fire offices as clients, and had built up "one of the largest and most thriving insurance agencies in the East." IT 13 (Dec. 1880): 700.
37. RdV 27 (1877): 37-43.
38. Monica Keneley, "The Origins of Formal Collusion in Australian Fire Insurance, 1870-1920," Australian Economic History Review 42, no. 1 (2002): 54-76. The same is true of Britain beginning in the 1860s.
39. Oliver M. Westall, "Marketing Strategy and the Competitive Structure of British General Insurance, 1720-1980," Business History 36, no. 2 (1994): 20-46.
40. For example, La Foncière of Paris established an offshoot, La Fondiaria, in Florence in 1878. Assecuranz Jahrbuch (hereafter AJ) 1 (1880): 269-70.
41. Dickson, Sun Insurance Office, 226-30;
42. Pearson, "British and European Insurance Enterprise," 438-51.
43. Post Magazine (hereafter PM), 6 June 1899.
44. Pearson, "Reinsurance Markets."
45. Robin Pearson, "The Birth Pains of a Global Reinsurer: Swiss Re of Zurich, 1864-79," Financial History Review 8, no. 1 (2001): 27-47.
46. RdV 22 (1872): 276-77;
47. RdV 26 (1876): 181-82.
48. There were twenty-five foreign reinsurance bureaus in Paris alone by 1878. RdV 28 (1878): 51-52.
49. Skandia Corporate Archive, Styrelseprotokoll, 3 Apr. 1900; Swiss Re Corporate Archive, Swiss Re., Protokolle der Verwaltungsratssitzungen, 14 July 1910.
50. Edith T. Penrose, The Theory of the Growth of the Firm (Oxford, 1959);
51. Yair Aharoni, The Foreign Investment Decision Process (Boston, 1966);
52. Richard M. Cyert and James G. March, A Behavioral Theory of the Firm (Englewood Cliffs, N.J., 1963);
53. Stephen H. Hymer, The International Operations of National Firms: A Study of Direct Foreign Investments (Cambridge, Mass., 1976).
54. Jan Johanson and Jan-Erik Vahlne, "The Internationalization Process of the Firm: A Model of Knowledge Development and Increasing Foreign Market Commitments," Journal of International Business Studies 8, no. 1 (1977): 23-32;
55. Mats Forsgren, "Some Critical Notes on Learning in the Uppsala Internationalization Process Model," working paper, no.2 (Uppsala, 2002);
56. Ingmar Björkman and Mats Forsgren, "Nordic International Business Research: A Review of its Development," International Studies of Management and Organization 30, no. 1 (2000): 6-25.
57. Spain's first multinational insurer, La Union y El Fénix Español, founded in 1864, commenced direct underwriting abroad in Portugal in 1868. José Luis Garcia-Ruiz and Leonardo Caruana, "The Internationalisation of the Business of Insurance in Spain, 1939-2005," in Internationalisation and Globalisation of the Insurance Industry, eds. Borscheid and Pearson, 66-83.
58. Karl Færden, Forsikringsvesenets historie i Norge, 1814-1914 (Oslo, 1967), 324-25.
59. AJ 20 (1899): 158.
60. These were the Ren He and the Ji He companies, founded in 1876 and 1878, respectively. Zheng Rang, "Assurance modernes en Chine: Une continuité interrompue (1801-1949)," Risques 31 (July-Sept. 1997): 103-20.
61. PM, 20 Aug. 1881.
62. PM, 27 Mar. 1886, 3 Aug. 1889.
63. AJ 2 (1881): 367-68;
64. AJ 18 (1897): 184;
65. AJ 17 (1898): 145;
66. AJ 20 (1899): 158;
67. PM, 8 Apr. 1882. The average premium yield per $100 insured in the United States for seventeen British and German fire offices operating there in 1878 was over twice as high as the yield from their business in the rest of the world.
68. Calculated from IT (Aug. 1879): 573.
69. Mikael Lönnborg and Robin Pearson, "Multinational Insurers and Catastrophic Loss: Responses to the San Francisco Earthquake, 1906," unpublished paper.
70. Insurance & Commercial Magazine (hereafter ICM) 14 (Jan.-June 1883): 334.
71. Nippon Life Insurance Company, The 100-Year History of Nippon Life: Its Growth and Socio-Economic Setting, 1889-1989 (Osaka, 1991), 46, discussing the Nippon Sea and Land Insurance Company;
72. The Tokio Marine & Fire Insurance Company, The Tokio Marine & Fire Insurance: The First Century, 1879-1979 (Tokyo, 1980), 36-45;
73. Trebilcock, Phoenix Assurance, 1: 317; 2: 141.
74. "Home-foreign" premiums declined from 28 percent of foreign premiums earned by the Phoenix of London in 1846-50 to 8 percent in 1866-70. Trebilcock, Phoenix Assurance, vol.1: 190, table 5.6.
75. In this paper, "foreign" only applies to insurance companies whose head office is located in another country. In federal polities, such as the United States and Germany, the term was also often applied by state authorities to companies from other states operating in their territory. Such companies are here referred to as "out of state."
76. Calculated from Jahrbuch für das gesamte Versicherungswesen in Deutschland, 1864-66.
77. Richard. A. Posner, "Theories of Economic Regulation," Bell Journal of Economics and Management Science 5, no. 2 (1974): 335-58;
78. Sam Peltzman, "Toward a More General Theory of Regulation," Journal of Law and Economics 19, no. 2 (1976): 211-40;
79. Kenneth J. Meier, The Political Economy of Regulation: The Case of Insurance (Albany, 1988).
80. Ludwig Arps, Auf sicheren Pfeilern: Deutsche Versicherungswirtschaft vor 1914 (Göttingen, 1965), 37-48.
81. Police Validation of fire-insurance policies became a legal requirement in Hanover in 1828, Hesse in 1833, Prussia in 1837 (insurance on goods) and 1841 (buildings insurance), and Wurttemberg in 1852. The nature and scope of this validation is not known.
82. George J. Stigler, "The Theory of Regulation," Bell Journal of Economics and Management Science 2, no. 1 (1971): 3-21.
83. Meier, Political Economy, 54.
84. See the list in Hoyden's Annual Cyclopedia of Insurance in the United States (Hartford, 1906-7), 638-46.
85. ICM 9 (June-Nov. 1880): 248.
86. Western Insurance Review (hereafter WIR) 1 (1867-68): 310-11.
87. RdV 9 (1859): 45-47.
88. Alf Lüdkte, Police and State in Prussia, 1815-1850 (Cambridge, U.K., 1989);
89. Reinhart Koselleck, Preußen zwischen Reform und Revolution (Munich, 1989).
90. lThe U.S. exception was a federal stamp duty on all fire-insurance policies introduced in 1862.
91. The latter was reduced to 2 percent in the wake of the great New York City fire of 1835. State of New York, New York Insurance Reports - Condensed Edition, vol. 1: 1830-53 (Albany, 1873), xxiv.
92. Deutsche Versicherungs-Zeitung 21 (1880): 603.
93. RdV 22 (1872): 411.
94. WIR 3 (1869-70): 382;
95. Rough Notes 60 (1917): 104.
96. Rosales and Quiza, "Los Seguros en España," 198. For similar requirements in Russia, see RdV 22 (1872): 21;
97. Paul J. Best, "Insurance in Imperial Russia," Journal of European Economic History 18, no. 1 (1989): 139-69.
98. Cf., for example, the Spanish insurance law of 1908, which required all companies seeking a license to have just 25 percent paid up on their shares: Rosales and Quiza, "Los Seguros en España," 188-89.
99. ICM 14 (Jan.-June 1883): 146-47, 154.
100. Tony A. Freyer, "Business Law and American Economic History," in The Cambridge Economic History of the United States, vol. 2: The Long Nineteenth Century, eds. Stanley L. Engerman and Robert E. Gallman (Cambridge, U.K., 2000), 435-82;
101. Edward A. Purcell Jr., Litigation and Inequality: Federal Diversity Jurisdiction in Industrial America, 1870-1958 (New York, 1992).
102. George A. Clements, Digest of Fire Insurance Decisions in the Courts of the United States, Great Britain and Canada (New York, 1893).
103. Foreign insurers, of course, could face hostile juries as well as sympathetic judges in the United States, most notably when involved in claims litigation after the San Francisco earthquake of 1906. Lönnborg and Pearson, "Multinational Insurers and Catastrophic Loss."
104. RdV 13 (1863): 368-72.
105. WIR 3 (1869-70): 689-70;
106. RdV 30 (1880): 358-59;
107. ICM 7 (July 1879): 101. Some states were quick to follow New York's lead. In Ohio, for instance, a law came into effect in 1880 banning companies from writing both fire and life insurance.
108. ICM 8 (Jan. 1880): 107.
109. Morton Keller has described four types of business regulation, namely, American "pluralist," German "corporatist," British "contract liberal," and French "dirigiste." However, these have questionable relevance to insurance where the multiple layers of regulation in countries such as Germany and Belgium defy any such neat typologies based on political economy. Morton Keller, "The Pluralist State: American Economic Regulation in Comparative Perspective, 1900/1930," in Regulation in Perspective: Historical Essays, eds. Morton Keller and Thomas McCraw (Boston, 1981).
110. So far, we have found no evidence of formal international collaboration among insurance regulatory bodies during this period.
111. William J. Novak, The People's Welfare: Law and Regulation in Nineteenth-Century America (Chapel Hill, 1996).
112. Argued by regulators, for example, in the Swiss cantons. Martin Körner, Banken und Versicherungen im Kanton Luzern vom ausgehenden Ancien Régime bis zum ersten Weltkrieg (Lucerne, 1987), 157.
113. Spectator 12 (1874): 146-47.
114. Wilkins has demonstrated this in the case of U.S. life insurers in Germany before 1914, where New York Life, thanks to the diplomatic talents of its vice president, coped with hostile regulators more effectively than the other American offices. Wilkins, Emergence of Multinational Enterprise, 103-7.
115. Peter Borscheid, "Systemwettbewerb, Institutionenexport und Homogenisierung: Der Internationalisierungsprozess der Versicherungswirtschaft im 19. Jahrhundert," Zeitschrift für Unternehmensgeschichte 51, no. 1 (2006): 26-53.
116. Robin Pearson, "Las compañies extranjeras en España, 1800-1939," in Empresas y Mercado del Seguro en la España Contemporánea, eds. Jerònia Pons Pons and Maria Angeles Pons Brias (forthcoming).
117. We wish to thank Janette Rutterford for raising this point with us.
118. There is only limited evidence of premium rate regulation through most of the period we cover. In Austria, the power to examine policy conditions and premium rates was extended in 1860 to provincial commissioners appointed by the Ministry of the Interior, but how far they amended rates is unknown. In Russia, the premium rates of the state-chartered fire-insurance companies were fixed by their charters. In the United States, despite the extension of antitrust regulation to fire insurance - sixteen states had enacted so-called anti-compact laws by 1907 - no state directly regulated premium rates before Kansas did so in 1909. The Kansas law was contested through the courts, until it was finally upheld by the Supreme Court in 1914. Anticompact laws counted from Hayden's Annual Cyclopedia of Insurance in the United States, 1906-7 (Hartford, 1907), 28-45.
119. Mikael Lönnborg, "Svenska försäkringsbolag tidiga internationalisering," Nordisk Försäkringstidskrift no. 4 (2000): 312-36;
120. and "Skandiakoncernens internationella verksamhet 1887-1995," Nordisk Försäkringstidskrift no. 3 (2002): 1-20.
121. Swiss Re, "Emerging Markets: The Insurance Industry in the Face of Globalisation," Sigma no. 4 (2000).