The determinants of reinsurance in the Swedish property fire insurance market during the interwar years, 1919-39

Hale Abdul Kader, Michael Adams, Lars Fredrik Andersson, Magnus Lindmark

Research output: Contribution to journalArticle

  • 10 Citations

Abstract

Drawing a framework from agency theory, we use a panel data design to examine the factors motivating the level of demand for reinsurance in the rapidly developing Swedish property fire insurance market during the interwar period 1919–39. We find that as hypothesised, reinsurance enabled Swedish fire insurers to mitigate underwriting and solvency risks and thus increased their capacity to underwrite new business in uncertain economic times. This in turn helped to increase the supply of indemnity coverage for property (buildings) fire risks in the Swedish insurance market. We also find that as expected, investment earnings are inversely related to reinsurance purchases. However, contrary to what was hypothesised, reinsurance appears to be positively related to liquidity levels, suggesting that over our period of analysis, fire insurers could have been reinsuring to ‘protect’ earnings and accumulated cash reserves therefore enabling investment opportunities to be realised. Analysis of the sub-period 1919–28 further supports this contention, while our results for the economic depression years after 1929 show that reinsurance helped mitigate underwriting and insolvency risks, suggesting that the reinsurance decision of fire insurance companies could be motivated by macroeconomic factors.
LanguageEnglish
Pages268-284
Number of pages17
JournalBusiness History
Volume52
Issue number2
Early online date26 Apr 2010
DOIs
StatusPublished - Apr 2010

Fingerprint

Reinsurance
Insurance market
Interwar Years
Insurance
Insurer
Underwriting
Economics
Agency Theory
Liquidity
Economic Depression
Macroeconomics
Panel Data
Interwar Period
Cash
Insolvency risk
Macroeconomic factors
New business
Investment opportunities
Solvency
Panel data

Cite this

The determinants of reinsurance in the Swedish property fire insurance market during the interwar years, 1919-39. / Kader, Hale Abdul; Adams, Michael ; Andersson, Lars Fredrik; Lindmark, Magnus.

In: Business History, Vol. 52, No. 2, 04.2010, p. 268-284.

Research output: Contribution to journalArticle

Kader, Hale Abdul ; Adams, Michael ; Andersson, Lars Fredrik ; Lindmark, Magnus. / The determinants of reinsurance in the Swedish property fire insurance market during the interwar years, 1919-39. In: Business History. 2010 ; Vol. 52, No. 2. pp. 268-284
@article{9450ec5a14ac457b8667ce752e2e0cb2,
title = "The determinants of reinsurance in the Swedish property fire insurance market during the interwar years, 1919-39",
abstract = "Drawing a framework from agency theory, we use a panel data design to examine the factors motivating the level of demand for reinsurance in the rapidly developing Swedish property fire insurance market during the interwar period 1919–39. We find that as hypothesised, reinsurance enabled Swedish fire insurers to mitigate underwriting and solvency risks and thus increased their capacity to underwrite new business in uncertain economic times. This in turn helped to increase the supply of indemnity coverage for property (buildings) fire risks in the Swedish insurance market. We also find that as expected, investment earnings are inversely related to reinsurance purchases. However, contrary to what was hypothesised, reinsurance appears to be positively related to liquidity levels, suggesting that over our period of analysis, fire insurers could have been reinsuring to ‘protect’ earnings and accumulated cash reserves therefore enabling investment opportunities to be realised. Analysis of the sub-period 1919–28 further supports this contention, while our results for the economic depression years after 1929 show that reinsurance helped mitigate underwriting and insolvency risks, suggesting that the reinsurance decision of fire insurance companies could be motivated by macroeconomic factors.",
author = "Kader, {Hale Abdul} and Michael Adams and Andersson, {Lars Fredrik} and Magnus Lindmark",
year = "2010",
month = "4",
doi = "10.1080/00076791003610683",
language = "English",
volume = "52",
pages = "268--284",
journal = "Business History",
issn = "0007-6791",
publisher = "Taylor & Francis",
number = "2",

}

TY - JOUR

T1 - The determinants of reinsurance in the Swedish property fire insurance market during the interwar years, 1919-39

AU - Kader,Hale Abdul

AU - Adams,Michael

AU - Andersson,Lars Fredrik

AU - Lindmark,Magnus

PY - 2010/4

Y1 - 2010/4

N2 - Drawing a framework from agency theory, we use a panel data design to examine the factors motivating the level of demand for reinsurance in the rapidly developing Swedish property fire insurance market during the interwar period 1919–39. We find that as hypothesised, reinsurance enabled Swedish fire insurers to mitigate underwriting and solvency risks and thus increased their capacity to underwrite new business in uncertain economic times. This in turn helped to increase the supply of indemnity coverage for property (buildings) fire risks in the Swedish insurance market. We also find that as expected, investment earnings are inversely related to reinsurance purchases. However, contrary to what was hypothesised, reinsurance appears to be positively related to liquidity levels, suggesting that over our period of analysis, fire insurers could have been reinsuring to ‘protect’ earnings and accumulated cash reserves therefore enabling investment opportunities to be realised. Analysis of the sub-period 1919–28 further supports this contention, while our results for the economic depression years after 1929 show that reinsurance helped mitigate underwriting and insolvency risks, suggesting that the reinsurance decision of fire insurance companies could be motivated by macroeconomic factors.

AB - Drawing a framework from agency theory, we use a panel data design to examine the factors motivating the level of demand for reinsurance in the rapidly developing Swedish property fire insurance market during the interwar period 1919–39. We find that as hypothesised, reinsurance enabled Swedish fire insurers to mitigate underwriting and solvency risks and thus increased their capacity to underwrite new business in uncertain economic times. This in turn helped to increase the supply of indemnity coverage for property (buildings) fire risks in the Swedish insurance market. We also find that as expected, investment earnings are inversely related to reinsurance purchases. However, contrary to what was hypothesised, reinsurance appears to be positively related to liquidity levels, suggesting that over our period of analysis, fire insurers could have been reinsuring to ‘protect’ earnings and accumulated cash reserves therefore enabling investment opportunities to be realised. Analysis of the sub-period 1919–28 further supports this contention, while our results for the economic depression years after 1929 show that reinsurance helped mitigate underwriting and insolvency risks, suggesting that the reinsurance decision of fire insurance companies could be motivated by macroeconomic factors.

UR - http://www.scopus.com/inward/record.url?scp=77951720213&partnerID=8YFLogxK

UR - http://dx.doi.org/10.1080/00076791003610683

U2 - 10.1080/00076791003610683

DO - 10.1080/00076791003610683

M3 - Article

VL - 52

SP - 268

EP - 284

JO - Business History

T2 - Business History

JF - Business History

SN - 0007-6791

IS - 2

ER -