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World Insurance: The Evolution of a Global Risk Network

Reviewer(s):Clark, Geoffrey

Published by EH.Net (August 2013)
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Peter Borscheid and Niels Viggo Haueter, editors, World Insurance: The Evolution of a Global Risk Network. Oxford: Oxford University Press, 2012. xvi + 729 pp. $180 (hardcover), ISBN: 978-0-19-65796-4.

Reviewed for EH.Net by Geoffrey Clark, Department of History, State University of New York at Potsdam.

This massive volume on the spread and integration of insurance services internationally comes on the heels of two much less comprehensive collections of essays about insurance globalization during the past two centuries.[1]? Those earlier studies were self-consciously pioneering efforts to descry the contours of a convoluted and sprawling historical landscape that scholars had scarcely explored hitherto. Now, with the appearance of World Insurance: The Evolution of a Global Risk Network, the development and diffusion of insurance worldwide has received a definitive, although hardly final, treatment. For the first time, historians working across a range of subjects from finance and economic modernization to social welfare and even religion have access to a systematic account of how the insurance industry has transformed the risk environment faced by billions around the world and how that process has knit together the economies and fortunes of far flung societies and cultures.

That said, few readers will possess the fortitude to read this book cover to cover, an expectation that the editors wisely seem to have anticipated in their format. Peter Borscheid provides an admirably concise summary of the overarching themes in a general introduction, which is followed by six parts successively devoted to Europe, North America, Sub-Saharan Africa, the Middle East and Northern Africa, the Far East and Pacific, and Latin American and Caribbean. Each of those regional sections begins with another of Borscheid?s introductory overviews, followed by a number of essays focused on specific countries. This organization allows readers to easily survey the broad features of the international insurance business or to bore down into the experience of one region or nation. The geographical coverage is not uniform ? nor could it possibly be given the fact that in the modern era insurance services radiated largely from the UK and were taken up earliest and most strongly in Europe and North America. The vast disparities in global wealth and insurance penetration that persist to the present are reflected narratively in the eight chapters that cover individual European countries while only one chapter examines the national history of sub-Saharan nations, namely the quite exceptional case of South Africa. That telltale gap is also illustrated in Borscheid?s astonishing observation that (leaving South Africa aside) the total of insurance premiums currently paid in all of sub-Saharan Africa is just 1.5 times that spent in tiny Liechtenstein (p. 324).

One of the central themes running through the essays of World Insurance, and forcefully argued by Borscheid, is that the spread of insurance around the globe was closely tied to the migration of Europeans themselves rather than simply to the export of the insurance idea alone. In the nineteenth and early twentieth centuries insurance services were focused mainly on the property and lives of Europeans settled abroad. As late as 1950, to cite an extreme example, 99 percent of insurance policyholders in Ethiopia were foreign residents (p. 316). These essays offer several explanations for the slow adoption of the insurance habit by indigenous peoples. Widespread poverty in many regions simply made insurance policies unaffordable, while the persistence of community- and kin-based networks of mutual aid reduced the need for European-style insurance facilities. On the other hand, as G. Balachandran points out, colonial prejudices made Western insurers wary of extending insurance coverage to native populations. One insurance trade journal from 1891 objected that Indians were bad risks because they were prone to early death and were difficult to identify positively, a fact that invited fraud since ?as a rule, the native is … devoid of moral sense in the matter of truth? (p. 447). Finally, religious scruples have sometimes prevented the acceptance of insurance, especially in conservative Arabian Peninsula, because Sharia law does not recognize insurance contracts and forbids speculation on human life. In a move reminiscent of earlier European attempts to circumvent prohibitions on usury, insurers in Muslim lands have devised Takaful, a mutualized form of insurance that is Sharia-compliant.
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Although one of the stated aims of World Insurance is to provide a cultural context to the rapid spread of insurance around the world (p. 1), the preponderance of attention is given to the economic and political dimensions of that development. The first wave of insurance globalization was carried out in the era of high liberalism as European powers established underwriting facilities in settler enclaves and then began to cultivate a local market in fire, property and casualty, and to a much lesser extent, life insurance. Towards the close of the nineteenth century European countries began to erect protectionist barriers to foreign insurers, a move replicated in following decades by Asian, African, and Latin American nations, who variously imposed reserve requirements, currency regulations, and discriminatory taxes on foreign companies in order to prevent capital outflows and to foster domestic insurance industries. In many cases these efforts succeeded in cultivating a home market, but at a price: many entrants into these fledgling markets were undercapitalized and poorly managed, prompting governments both in Europe and around the world to initiate periodic regulatory shakeouts of weak companies. In any case, the extent to which national insurance markets could truly be isolated from the global economy was limited by the excess risks ceded by domestic insurers to international reinsurers like Swiss Re (the company that, not coincidentally, sponsored this historical study of insurance internationalization). This protectionist era came to an end in the 1980s and 90s with the inauguration of what Jer?nia Pons Pons describes as the second wave of insurance globalization, which involved a relaxation of restrictions on foreign insurers; a string of mergers, acquisitions, and the creation of foreign subsidiaries; and the realization of greater efficiencies as the result of keener competition.
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Opportunities for the spread of insurance have also fluctuated with the ebb and flow of programs either to socialize or to privatize insurance risks. The creation of the Soviet Union and the People?s Republic of China furnish the most dramatic examples of the wholesale transfer of insurance services to state control. But whether done in the name of socialism, fascism, social democracy, or anti-colonial nationalism, the assumption by the state of responsibility for the provision of health care and pensions, or compensation for losses due to fire, flood, or loss of life, all diminished or eliminated the latitude of insurance businesses operating across national boundaries. The recent return to an emphasis on less regulated private enterprise in providing insurance cover, as well as the more integrated delivery of financial services exemplified by bancassurance, is just the latest swing of the pendulum toward private control, now in the guise of multinational corporate power and a neo-liberal ideology. Whether the post-2008 financial debacle will induce a return to a more stringent regulatory environment and a new generation of statist approaches to insurance is a question that must await a sequel to Borscheid and Haueter?s imposing and standard-setting World Insurance.

Note:
1. Peter Borscheid and Robin Pearson, editors, Internationalisation and Globalisation of the Insurance Industry in the 19th and 20th Centuries (Marburg: Philipps-University, 2007); Robin Pearson, editor, The Development of International Insurance (London: Pickering & Chatto, 2010).

Geoffrey Clark is Professor of History at the State University of New York at Potsdam. He is the author of Betting on Lives: The Culture of Life Insurance in England, 1695-1775 and co-editor of The Appeal of Insurance. He is working on a study of slavery insurance in the late medieval Mediterranean.

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Subject(s):Business History
Financial Markets, Financial Institutions, and Monetary History
Geographic Area(s):General, International, or Comparative
Time Period(s):19th Century
20th Century: Pre WWII
20th Century: WWII and post-WWII