SERVICE PERFORMED BY MARINE INSURANCE COMPANIES|
From the Fireman's Fund Record, October 1915
By J. B. Levison
The following address, by Vice-President J. B. Levison of this Company, was delivered October 5 before the Worlds Insurance Congress at the Panama-Pacific International Exposition. This day was devoted especially to consideration of the constructive influence of insurance.
The subject I have been asked to discuss this afternoon, "Service Performed by Marine Insurance Companies," is so broad and comprehensive as to put any detailed consideration out of the question in the very short time allotted to me. I will, therefore, simply endeavor to outline, as concisely as possible, the most important features of marine underwriting in its relation to the development of the human race, touching upon its history, the influence it has had on the exploration and exploitation of new and undeveloped countries; its close relation to the commercial development of the world, and finally, the very important part it has taken in the present great war.
Marine insurance is the oldest form of indemnity known. It is generally supposed to have had its beginning contemporaneously with the birth of commercial activity in the Mediterranean about the twelfth century, but unfortunately little is known respecting its conduct at that time. English authorities tell us that the Lombards introduced marine insurance into London during the thirteenth century, and a form of policy is described in a Florentine statute of about 1500 A. D., bearing a very remarkable resemblance to the policy which has been in use in London since the latter part of the sixteenth century, when practically all of the countries in Europe established rules and laws for the government of marine insurance. At that time the business was done altogether by individuals on what we know today as Lloyd's plan. The first stock companies organized for the transaction of marine insurance business were chartered in England in 1720, and in America in 1792.
It is a very interesting fact that the development of the business of marine underwriting in any particular country has always run parallel with the growth of its merchant marine. Prior to the Civil War, when the American mercantile marine was at its zenith, the United States had many more marine insurance companies than Great Britain, but with the disappearance of the American flag from the high seas the amount of American capital invested in marine insurance steadily decreased until in 1905 there were but three domestic companies doing a marine business exclusively and eleven companies writing marine business in connection with other branches. Today, owing to the anticipated development of the American mercantile marine as the result of the completion of the Panama Canal and the general agitation on the subject throughout the country, there are twenty-two American companies engaged in the marine insurance business. It is also an interesting collateral fact that most of the leading British marine offices now in existence were organized in the early sixties, or, in other words, during the American Civil War. Marine underwriting is an absolute necessity in the exploitation of new and undeveloped countries. This can readily be explained by the mere statement that no merchant nor corporation, no matter how wealthy, would undertake to send valuable vessels with their cargoes into new and unexplored countries without the protection afforded by marine insurance. An excellent illustration of this is in the development of Alaska, where, since its acquisition by this country in 1869, vessels have been trading, carrying valuable supplies north and returning with furs, salmon, gold, etc., frequently running into millions in value. The dangers of the Alaska coast, due to inefficient lighting and inadequate aids to navigation, lead one to view with surprise the fact that marine underwriters had sufficient hardihood to undertake the business, but high rates and the possibility of large profits were naturally attractive, with the result that the business has been written comparatively freely and the necessary protection afforded merchants and trading companies. I think it is quite within the mark to say that without this protection Alaska never would have become the valuable asset to the United States that it is today.
The influence of marine insurance on the commerce of the world in general requires no extended discussion. No business concern, whether corporate or individual, conducts its affairs today without some form of marine insurance. The exporter with marine insurance policies attached to his invoices and bills of lading can obtain an advance from his bankers approximating the value of the shipment. The importer, through the protection of marine insurance, can have letters of credit issued against which drafts may be drawn by buyers in any part of the world. In addition to this, the merchant may also insure his anticipated profits so that he not only has been enabled to obtain funds promptly in the shape of an advance, as just described, but he also has his profits guaranteed to him against loss by perils of the seas through the agency of marine insurance.
The part marine insurance has played in the present great war must have impressed itself upon all by what has been written on the subject of war risk insurance, the importance of which can best be illustrated by the fact that Great Britain practically on the very day she declared war established a government war risk bureau and called upon some of the leading marine men of Great Britain to direct its affairs. Without this government bureau, war risk rates would undoubtedly have been much higher, which was fully warranted by the hazards. High war risk insurance rates would, however, have seriously interfered with British commerce, and the British government, clearly appreciating the commanding importance of this, has, it is believed, been willing to conduct their war risk bureau at a considerable loss. This loss, however, is nothing as compared with the extraordinary cost of the war, especially when the fact is considered that marine insurance companies the world over have thereby been forced to write insurance by British vessels at much lower rates than would otherwise have been done.
Many other countries, including the United States, appreciating the value of a government war risk bureau, as demonstrated by Great Britain, have established similar departments for the protection of their own vessels. The result of this undoubtedly has been that commerce between the nations has been stimulated and maintained at a comparatively small cost to the nations themselves.
No paper on marine insurance would be complete without a reference to the expression "Lloyd's," which is so frequently used in connection with shipping and underwriting affairs. We are told that it has all come down from one Edward Lloyd, the owner of a coffee-house in London about 1690, which was the rendezvous for ship-masters, shipping men and merchants generally during the last half of the seventeenth century and gradually became a central point for all persons connected with shipping. From this simple beginning has developed the use of the word "Lloyd's," until today it is almost universally understood as having some definite relation to maritime affairs.
In conclusion and to address myself particularly to the a subject this day is designed to emphasize, marine insurance exercises beyond doubt the greatest influence in conserving life and property. Marine underwriters have always been to the forefront as originators and active supporters of classification registers, which provide rules and regulations for the construction of vessels, and subsequent regular supervision, thereby insuring structural strength and a maximum of safety.
Further, marine underwriting organizations have their own surveyors at almost every port of importance on the globe, to inspect vessels before loading and supervise the loading itself, which, it is needless to say, is almost of paramount importance.
Unfortunately time does not permit any further discussion of the subject, but enough has been said I hope to convey to the members of the Congress the fact that marine insurance is a factor of the very highest importance in the conservation of life and property as well as the maintenance of credit and the development of commerce.
[Fireman's Fund Archives: 4-1-3-4-26; 0405.]
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