R.F.O. WEALTH ADVICE

12 In Latin America insurance was imported on a large scale by the European immigrants. The British companies concentrated their attention on commercial risk whereas the immigrants helped spread insurance to a wider population. Very often such companies were based on reciprocity albeit with operational modes that were more modern than the traditional community-based models. The spreading of personal insurance was mainly a consequence of the mass migration from Europe during the nineteenth and the beginning of the twentieth century. In the secondhalf of the nineteenth century, the rapidgrowth in trade, industrialization, urban development, traffic and communication created a great need for insurance and at the turn of the century the industry was spreading across the world. However, it was also about to reach its limit. Around the middle of the nineteenth century both the size and the number of risks to be insured began to exceed the capacity of the insurance sector. Traditionally, the insurers would share the risks between them or resort to reinsurance with other insurers. Implicitly, although not originally envisaged, such practice required competitors to show each other their books. It also increased the probability of accumulating risks at a regional level and in certain sectors of activity. A way of avoiding such problems was that of looking for an insurance company based outside the national borders. However, this meant, once again, that the capital would leave the national economy and at the time capital was a very sought after asset fundamental to keep the pace with the industrial and economic development. So it was that the first specialized insurance companies were created to avoid the exit of capital and strengthen the national economies. Moreover, great environmental catastrophes such as wild fires had increased the need to share risks beyond local insurers. So it is that instead of founding new insurance companies it was deemed better to supply additonal risk capital. The rapid industrialization and urbanization recorded during the nineteenth century created risk concentrations thus obliging insurers to diversify their exposure. So it is that the clear role of independent reinsurers capable of spreading insurers’ risks, develop skills and supply capital when it was absolutely necessary emerged. The economic recovery of the 1920’s seemed to improve the situation even further.