Reinsurance strategies in Spanish fire insurance companies

What is it about?

Reinsurance serves as an imperfect substitute of equity capital. We examine the differences among the determinants of reinsurance purchases regarding their country of origin and their chance to access more or less advanced financial systems.

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Why is it important?

We show that reinsurance strategies involve not only actuarial criteria but also a financial decision. As early as in the first third of the twentieth century, the Spanish fire insurance industry relied heavily in the purchase of foreign reinsurance. This contributes to explain the international financial dependence of less developed economies and the mechanisms of the globalization of financial activities.