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Variation in organizational form across lines of property insurance: Sweden, 1913–1939

Published online by Cambridge University Press:  26 March 2014

Josef Lilljegren  and
Lars Fredrik Andersson
Josef Lilljegren*
Affiliation:
Department of Geography and Economic History, Umea University, SE-90187, Umea, Sweden
Lars Fredrik Andersson*
Affiliation:
Department of Geography and Economic History, Umea University, SE-90187, Umea, Sweden
*
J. Lilljegren, PhD candidate, josef.lilljegren@ekhist.umu.se
L. F. Andersson, Associate Professor, larsfredrik.andersson@ekhist.umu.se
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Abstract

This article examines the impact of organizational structure on risk taking across different lines of property insurance (fire, marine, vehicle and specialized property insurance) in Sweden from 1913 to 1939. Based on the theoretical arguments whereby the mutual organizational form has a competitive advantage in underwriting homogeneous but unknown risk distribution, while the stock organizational form is more likely to underwrite more volatile and heterogeneous risk categories, we conclude that organizational form has a significant impact on risk taking. Our empirical analysis shows that the risk taking, measured as incurred claims to anticipated losses, was on average lower among mutual insurers. When comparing across lines of insurance, the analysis shows that the mutual form was more successful in keeping down risks in fire and marine, while less so in vehicle and specialized property insurance. Stock companies mitigated the higher risk by ceding more premiums to reinsurers and by diversifying more across different lines of insurance.

Keywords

insurance historyorganizational forminformation asymmetryrisk

JEL classification

N24: Europe: 1913– G32: Financing Policy • Financial Risk and Risk Management • Capital and Ownership Structure • Value of Firms • Goodwill L10: General
Type
Articles
Information
Financial History Review , Volume 21 , Issue 1 , April 2014 , pp. 77 - 101
Copyright
Copyright © European Association for Banking and Financial History e.V. 2014 

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