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The Value of RiskSwiss Re and the History of Reinsurance$
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Harold James, Peter Borscheid, David Gugerli, and Tobias Straumann

Print publication date: 2013

Print ISBN-13: 9780199689804

Published to Oxford Scholarship Online: April 2014

DOI: 10.1093/acprof:oso/9780199689804.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 06 December 2021

On the Precipice

On the Precipice

(p.288) Chapter 16 On the Precipice
The Value of Risk

Harold James

Peter Borscheid

David Gugerli

Tobias Straumann

Oxford University Press

When the New York Stock Exchange crashed in 1929, Swiss Re was at first not alarmed. Only gradually did the managers realize that the recent shift from bonds into equities, especially in the US market, was about to have a major impact. Increased investment in the US market was partly forced by US regulation requiring that reserves had to be invested in the country where the business was written, but the decision to favour stocks was voluntary. Had the company stayed with bonds, its losses would have been negligible. Eventually, Swiss Re had to empty almost their entire reserves to cover losses. Covering the losses out of the reserves fund allowed the company to officially record profits throughout the crisis. Swiss Re divested some of its group companies and went back to a more cautious and traditional investment strategy.

Keywords:   1929 crash, stock market, bond market, US regulation, reserves

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