Reinsurance in America: Regulatory Regimes and Markets

Abstract

Despite possessing one of the largest and most important economies in the world for two centuries, the United States until recently was noted more for its securities markets than its banks, a fact generally attributed to regulatory rules, like unit banking and the separation of commercial and investment banking, that favored small banks. U.S. regulatory regimes also appear to have created a preference for alternative risk transfer mechanisms (ARTM), including risk markets, over the creation of large, domestic reinsurance companies. This paper explores that hypothesis by examining the history of reinsurance and reinsurers in the U.S. since the nineteenth century using both archival and printed primary sources and concludes that where large, domestic reinsurers are blocked by costly regulations, direct writers will turn to alternative forms of sharing risks, including ARTM and foreign and reciprocal reinsurance.

Keywords: Financial History, Insurance History, Reinsurance, Alternative Risk Transfer Mechanisms, Insurance Regulation

JEL Classification: G22, G28, N21, N22