Risk and the Insurance Business in History

Published by EH.Net (May 2021)

Jerònia Pons and Robin Pearson, editors, Risk and the Insurance Business in History. Madrid: Fundación Mapfre, 2020. 290 pp. ISBN: 978-84-9844-753-8.

Reviewed for EH.Net by Chris Kingston, Department of Economics, Amherst College.

The history of insurance, as many authors have noted, has been relatively neglected by historians, including economic historians; but in recent years, with a steady growth of interest from scholars across a range of disciplines, the field has been expanding in geographic, historical and methodological scope.

In June 2019, two leading pioneers in the field, Jerònia Pons (University of Seville) and Robin Pearson (University of Hull) organized an international conference on “Risk and the Insurance Business in History” at the University of Seville. The conference brought together scholars of insurance and risk from a wide variety of academic and professional perspectives, with the explicit goal of creating a forum to encourage interdisciplinary dialogue. For insurance scholars, as this reviewer can attest, it was a rare and valuable opportunity to network, and a remarkably fertile, stimulating and enjoyable gathering. Hats off.

This collection of nine papers presented at the conference, edited by Pons and Pearson, is published with the support of the Mapfre Foundation, which also supported the conference itself. In a valuable and wide-ranging introduction, the editors weave together some of the disparate strands of the fragmented literatures on risk and insurance. Their survey takes in cultural theorists’ studies of how perceptions of risk, liability, and insurance vary across cultures; behavioral economists’ studies of the psychological anomalies that arise in decision-making under uncertainty; and sociologists and legal scholars’ approach to the insurance industry as a source of a kind of governance over risk-taking behavior among the insured. They also emphasize the omnipresent role of “the state” in multiple roles: as a provider of various kinds of insurance, as a source of risk through warfare, and as a fount of regulation that has the potential to constrain or encourage the development of insurance markets, organizations, and practices. The overarching point is to underscore the editors’ motivation for organizing the Seville conference: the diversity of approaches to the study of risk and insurance in history, and their belief in the potential for beneficial collaboration and cross-pollination.

While the quality of the contributions varies, and some might have benefited from more intensive editing, there are several very valuable papers in this collection that stretch the boundaries of the discipline and deserve to be widely read by those interested in insurance history and related fields.

Timothy Alborn tells the fascinating tale of how nineteenth-century British life insurers wrestled with the question of how to insure the lives of missionaries, soldiers and Victorian adventurers as they ventured to remote and frequently pestilential corners of the world and the Empire — areas about which the companies had only very scattered and incomplete information. These companies also made hesitant and frequently racially prejudiced forays into the business of insuring non-white colonial subjects of the Empire, even as it gradually became clear that the “civilized” locals often experienced better health and lower mortality in their native climes than did their European expatriate masters. In contrast, for the late nineteenth century American insurers whose efforts to expand into Latin America are adroitly described by Sharon Ann Murphy, the whole point was to insure the locals. Their efforts were however hampered by agency problems, ultimately collapsing as they abandoned the field to emergent domestic firms in the face of restrictive legislation, political uncertainty, and scandal.

Leonardo Caruana de las Cagigas and André Straus survey the legal development and the increasing role of state regulation of the insurance industry in France and Spain from the late eighteenth to the early twentieth century, as new forms of insurance and organizational innovations emerged. Development in Spain generally lagged behind France, enabling Spanish companies and regulators to take advantage of the lessons learned elsewhere, but divergent political histories ensured that paths of development remained distinct. Christofer Stadlin contrasts the development of employer accident and liability insurance as it was shaped by the regulatory environments in Germany and France in the late nineteenth century up until World War I, as seen through the eyes of the Zurich Insurance Company which was active in both markets.

José García-Ruiz presents a company history of the “bancassurance” relationship between the Spanish Banesto bank and Luyefe, Spain’s leading insurance company for much of the twentieth century, as the closely connected firms navigated a turbulent political landscape and ventured into new areas of business. Mikael Lönnborg, Peter Hedberg and Lars Karlsson describe how the Swedish insurance law of 1948 deliberately favored larger firms under the belief that the industry would become more efficient through economies of scale. Yet the resulting increase in concentration in the Swedish insurance industry failed to yield the hoped-for improvements in consumer welfare.

Other chapters consider the South African regulatory response to the 2008 global financial crisis (Greitjie Verhoef); the evolution of the legal and regulatory framework underpinning the development of fire insurance in nineteenth-century Canada, influenced by both French, British and American precedents (David Gilles and Sébastien Lanctôt); and how the valuation of American insurance companies’ assets was fudged, with the approval of the authorities, to enable them to satisfy solvency requirements during the financial crisis of the early 1930s (Luca Froelicher).

With such a wide breadth in focus, scope, and methodology, it is debatable whether this collection amounts to more than the sum of its parts. Pearson and Pons, seeking for a unifying theme in their introductory essay, draw attention to the congruence in time periods (most contributions deal with the nineteenth and early twentieth centuries) and to the influence of state regulation on decision-making by insurance companies; and certainly “the state,” in one way or another, looms large in all of these pieces, as it must in any study of modern insurance. The real significance of the volume is as a milestone for a field of study that is progressing vigorously, and that holds the promise of important and potentially fruitful interdisciplinary research questions that have barely begun to be explored. In this regard at least, the vision of the conference organizers, the editors of this volume, is fully vindicated.

Chris Kingston is the Richard S. Volpert ’56 Professor of Economics at Amherst College. He has published several papers on the history of marine insurance in eighteenth-century Britain and America and is working on a book provisionally entitled In Peril on the Sea: Institutional Change in Marine Insurance, 1720-1844.

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