History of Reinsurance

Topics: Reinsurance, Insurance, Actuarial science Pages: 13 (4368 words) Published: February 6, 2010
Incorporated: 1863
NAIC: 52413 Reinsurance Carriers
Schweizerische Rückversicherungs-Gesellschaft, known as Swiss Reinsurance Company, or Swiss Re in English-speaking countries, is the oldest professional reinsurance firm in Switzerland and one of the largest reinsurance companies in the world. It is notable for the range of its international activities, the fine reputation of the services it offers, and its powerful financial base. The company's main business segments include risk transfer, risk retention financing, and asset management. Swiss Re operates with over 70 offices in 30 countries across the globe. Professional reinsurance began in the 1840s in Cologne, where the first company specializing in this kind of insurance was set up in 1846. Switzerland was the first country outside Germany to take up the idea, which was put into effect when the Swiss Reinsurance Company was founded. The Swiss have contributed to the development of reinsurance by providing it with a theoretical foundation, as well as by taking the first steps towards internationalization and setting an early example of how to survive through times of crisis. The insurance industry got well under way in Switzerland soon after the middle of the 19th century. The moving spirit was Alfred Escher, statesman and entrepreneur, who laid the foundation of Zürich's development as a financial center with the establishment of the Schweizerische Kreditanstalt. In 1857, it played a decisive part in the creation of the Schweizerische Lebensversicherungs- und Rentenanstalt, the first major life insurance company in Switzerland. The evolution of fire insurance in Switzerland was given impetus by a conflagration in the cantonal capital of Glarus on May 10 and 11, 1861. With victims receiving very little in the way of compensation payment, the disaster exposed the deficiencies of existing insurance arrangements. On November 7, 1861, there was a general meeting of the Allgemeine Versicherungs-Gesellschaft Helvetia, founded in 1858 at St. Gall. It was the first Swiss company to sell marine insurance and also had provision in its statutes for the supplying of fire insurance. The meeting resulted in a decision to set up the Helvetia Schweizerische Feuerversicherungs-Gesellschaft St. Gallen. The purpose of the new company was to provide fire insurance coverage for buildings and movables in Switzerland and other countries. M.J. Grossman was appointed managing director of the new venture and remained at the head of both companies until 1910--nearly half a century. The insurance companies that started up in Basel in 1863-64 also owe their existence directly to the Glarus fire. This market situation and the possibility of extending into neighboring countries were seen as offering a good basis for the introduction of professional reinsurance into Switzerland. The initiative was taken by M.J. Grossmann, who reckoned that the reinsurance yield alone of the twoHelvetia companies justified a separate company, especially as in previous years over 20 percent of insurance premium was earned by foreign reinsurers. At the beginning of July 1863, Grossmann put his ideas on the subject into amemorandum addressed to the Schweizerische Kreditanstalt in Zürich and proposing the establishment of a reinsurance company in conjunction with the Helvetia. This memorandum is a landmark in the history of insurance, offering the first clear formulation of the fundamental principles underlying professional reinsurance. Grossman began by mentioning the first independent reinsurance company in Cologne. He suggested that the emergence of modern reinsurance was due to growing competition, which obliged insurers to make constantly increasing efforts to satisfy customers, with ever-larger amounts of money being involved, a considerable portion of it--the excess, in terms of the trade--going into the pockets of reinsurers. Reinsurance arrangements, he continued, could not be made with companies supplying...
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