Domestic Distortions and the Early Emergence of the International Trade in Fire Insurance from the UK

In the second half of the nineteenth century, British fire insurance exports grew rapidly to more than half of the revenue accepted by British fire insurance companies. It has been suggested by some, including Michael Porter, that this expansion was based on a comparative advantage created in large part by a highly competitive domestic insurance market. Yet the existence of strong and sophisticated cartels in the British insurance market is well known. The paper argues that in fact the chief motive for the drive to develop business abroad came from the existence of the cartel, whose increasing power prompted the creation of a number of new well‐supported companies. The circumstances of the insurance business forced them to develop a large and diversified business and this required them to join the cartel. This membership deprived them of the price weapon to develop their business in the domestic market. They were thus forced to develop innovative strategies to grow. One of these was to deploy innovative marketing policies at home. The other was to expand abroad. By contrast, most of the older companies that had created the cartel developed foreign business later and on a far smaller scale.