Insurance, size and exposure to actuarial risk: empirical evidence from nineteenth- and early twentieth-century German Knappschaften1

By the mid nineteenth century, German miners relied on their own job-related social insurance scheme providing them with sickness, invalidity and survivorship insurance benefits. Addressing the period from 1867 to 1913, this article investigates whether the mineworkers' insurance funds, the Knappschaften, could effectively minimise their exposure to the actuarial risk inherent in their operations – and, in fact, inherent in all such insurance schemes – by increasing the scale of pooling. Contemporary observers of the Knappschaften tended to focus on whether financial stability could be improved by exploiting economies of scale, rather than by improving the pricing techniques themselves. Evidence suggests that actuarial risk was minimised at around 5,000 contributors in a Knappschaft's pension insurance section and at about 1,000 contributors in its sickness insurance section.