Swiss Re's first business years
Categories
Swiss Re
Time
1864
Locations
ZurichCountries
United Arab Emirates
In 1864 – Swiss Re's first business year – the company developed reinsurance relations with insurance companies in Germany, Italy, France, Austria, England, Belgium and Russia.
But despite this promising start, the early years proved difficult. The Swiss market was small and primary insurers still preferred to co-insure, reducing their need for the recently established reinsurer. As the primary insurers were not obliged to share the terms and conditions of their own client contracts, their negotiating position was strong and it was unclear if the reinsurer paid too high a proportion of losses and commission. The reinsurer was also dependent, especially abroad, on the quality of the insurers' risk assessment, trusting that well-established firms would write good business.
This environment, where modern reinsurance had yet to be established, also favoured the use of simple quota share agreements, where the primary insurer would cede a proportion of each policy's premium and apportion the losses in the same ratio. This far from transparent marketplace forced a strong emphasis on working with trusted partners and establishing long-lasting relationships.
Swiss Re's first reinsurance treaty became effective in January 1864, taking on part of Helvetia General's direct and indirect marine insurance business. It then moved into fire reinsurance later in 1864 and into life reinsurance in 1865.
Fire insurance quickly produced poor results due to a general worsening trend in claims. Losses were especially heavy in France. At the 14 May 1869 general meeting, a decision was made to approve a share buy back that would help stabilise the stock price and reduce the outstanding loss payments. In the process the share capital was reduced from CHF 6 million to CHF 4.5 million.
It was the management skills of Josef Besso and Moritz Grossmann that enabled Swiss Re to survive these early years. They refined the contractual terms for business and introduced defined exit clauses. Putting quality before volume, poor contracts were renegotiated or terminated. By the 1880s finally, the role of reinsurers in Europe had become more established.
But despite this promising start, the early years proved difficult. The Swiss market was small and primary insurers still preferred to co-insure, reducing their need for the recently established reinsurer. As the primary insurers were not obliged to share the terms and conditions of their own client contracts, their negotiating position was strong and it was unclear if the reinsurer paid too high a proportion of losses and commission. The reinsurer was also dependent, especially abroad, on the quality of the insurers' risk assessment, trusting that well-established firms would write good business.
This environment, where modern reinsurance had yet to be established, also favoured the use of simple quota share agreements, where the primary insurer would cede a proportion of each policy's premium and apportion the losses in the same ratio. This far from transparent marketplace forced a strong emphasis on working with trusted partners and establishing long-lasting relationships.
Swiss Re's first reinsurance treaty became effective in January 1864, taking on part of Helvetia General's direct and indirect marine insurance business. It then moved into fire reinsurance later in 1864 and into life reinsurance in 1865.
Fire insurance quickly produced poor results due to a general worsening trend in claims. Losses were especially heavy in France. At the 14 May 1869 general meeting, a decision was made to approve a share buy back that would help stabilise the stock price and reduce the outstanding loss payments. In the process the share capital was reduced from CHF 6 million to CHF 4.5 million.
It was the management skills of Josef Besso and Moritz Grossmann that enabled Swiss Re to survive these early years. They refined the contractual terms for business and introduced defined exit clauses. Putting quality before volume, poor contracts were renegotiated or terminated. By the 1880s finally, the role of reinsurers in Europe had become more established.
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Categories
Swiss Re
Time
1864
Locations
ZurichCountries
Switzerland
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