The Sun.
London, England, 1856-03-27 00:00:00

MERCANTIL le 1116RALITV—PRAUDS ON
UNDERIYBiTERS.

Au unusually large attendance of members of Lloyd's
took place yesterday, at the annual meeting at the Sub-
scription Rooms, Royal Exchange, in consequence of it
notice given by one of the members of his intention to
firing forward a motion in relation " to the condition of
the underwriting business as it now exists." T. Baring,
M.P., president, in the chair.

The private business having been disposed of,
Mr. WATTS rose and said he had Been compelled to
give the notice attached to the requisition nuincooning
the present meeting, as it seemed to him the only avail-
able means of calling the attention of members gene-
rally to the serious condition of a considerable and an
increasing portion of the underwriting business to
some of the mischiefs that had already occurred, and
I to the inevitable result that must take place, unless
some immediate • and effectual steps were taken to
arrest that downward tendency which the room for
some time past had exhibited. Take, for instance,
what had occurred during the last year or there-about%
The unusual event—to the houour of that association
it might be so de:cribed—bad taken place of several
members declaring themselves unable to meet their en-
gagements. Next, they had witnessed the withdrawal
of a body of influential members from the underwriting
department, on the groand that the risks and liabilities
were so disproportioned to the premiums, that the-busi-
ness of underwriting was to a great extent not only an
unprofitable, but a ruinous operation. Then there had
been individual secessions, some giving up business
wholly, some in pelt ; some determining to refuse to in-
sure goods to any port of export, especially manufac-
tured goods shipped from the Mersey or the Clyde ;
others bad come to a similar resolution with respect to
bodies of ships, and to open policies, because the expe-
rience of late years had proved that no possible profit
could be made out of such a class of risks. Was this A
state of things to be permitted to prevail without some
effort being made to put an end to it ! Was it fitting
that such a condition of business ought to be allowed to
exist in such an ireportaut and influential association as
that of Lloyd's—au a-sociation which was a commercial
necessity, and intimately interwoven with the iibola
vast commercial fabric of the empire! What was the
cause of this state of .things ! The answer was not
difficult. Of late years a- cemplete change had oc-
curred, not only in the mode of conducting business,
but in the principles which governed business trans-
actions ; and, he might add, a new race had come
forward, with a new code of commercial morals, to put
those principles into action—thet while everything had
done homage to what he supposed, in the phrase of the
day, he must describe as the "progress of the age,"
there had been no analagons movement on the part of
the underwriter, who bad not adapted his system of
business to the alterations that had occurred. And the
natural consequence wa,, that, under the pressure of
competition, which acted with peculiar severity in the
direction of profits, he found himself distanced in the
race—he saw, without any corresponding counteraction
on his part, that business year by year became more
uncertain, inure speculative in character—in fact, to a
great extent, as he should endeavour to show, almost a
matter of gambling, but of *that kind of gambling in
which the stake was the underwriter's whole capital,
and where marked cards and loaded dice were used
against him. Ile would briefly remind the meeting of
the purpose for which that room was established. it
was established on simple and intelligible grounds—
for securing the shipper and shipowner against the
perils of sea and storm ; and, though the underwriter's
liabilities were extended in various directions, and
embodied in that piece of antiquated incomprehensible
jargon called a policy of assurance, still the liabilities
and responsibilities of the underwriter were sufficiently
limited and defined to enable bins to make those calcu-
lations performed in all other occupations, and by a fair
adjustment between premium and risk, to see his way
with tolerable clearness to a reasonable profit. But
would any member attempt to define the extent of an
underwriter's liability at the present ? He bad in vain
attempted to ascertain-them. He found the most exag-
gerated, contradictory, and preposterous notion afloat
on that question. In fact, it would appear that the
genteel practice was to assume that the underwriter's
liability begat' everywhere and ended nowhere—that it
was only necessary to get an underwriter's name on a
policy, by the lure of a small premium, of which, in
particular classes of risks, it was intended he should
never see a shilling, to make that circumetence the Mon-
d:4ton for every conceivable and unfounded kind of
claim. Look at the increased risk for which under-
writers now. were responsible. First, there was the
great change in the sizti of mercantile vessels, the un-
wieldy and dangerous class of vessels now employed,
the clipper nuisance and danger, the use of iron in the
construction of large ships, the oifficulty—ae every ship-
owner well knew—of procuring competent caetaine and
' mates, the impassibility of manning ships with able-
bodied British seamen, the necessity of making use of
under-sized, drunken, (import, and foreign Inbbere,
quite unfit for seamen's duties—thanks to legislative
tinkering of the laws by ignorant statesmen, for the
most part set is motion by interested adventurers, who
now feel the consequences of their own selfishness, and
are the most eager to retrace their steps. Above
all, look at the increased risk of collision arising
from the introduction of etearn, and the reckless seed--
tire of safety to speed. Each of these changes would
constitute a large iteni inehe hat of additidisal liabilities,
but combined, they press with inch crushing force on
the underwriter' profits and c Thal, as to make the
underwriting business ens of c weiin loss, and 'tethers
of uldream rule, if persevered in to any extent.. It
might be urged that this was a question of premium
only, and that underwriters had the remedy in their
own bands, by insisting on a suitab:e advance of pre-
mium. He denied that the view he was about to pre-
sent to the meeting of the question had anything what-
ever t) do with premium. It was on higher grounds
that he placed his question. But be would observe,
with respect to the feeling that underwriters had the
remedy in their own hand , practically such was not
the case. That which would be found at the root of all
the existing mischief, and if nothing was done, all the
mischief in store, was the utter want of unity in that
room. It was an association without the association
principle. There was no co-operation for the common
interest, as was the case it, all other societies founded
for a specific object. There were no general rules for
keeping business within legitimate channels, and for the
guidaiice of members in cases of emergency ; hence it
was that, as every new inetuber was obliged to conduct
business according to his experience or waist of experience,
an irregular system of business was eitreduced, and inno-
vations and novelties, all telling against tee underwriter,
became established usages. It was therefore hopeless to
expect, as experience proved, that any co-operation,
even for the common benefit could be brought about.
He bad stated that the case he proposed to bring under
the notice of the meeting was not a question of pre-
mium, it was a euestieu involving the character and the
honesty of a portion, and an mereasing portion, of the
business transacted in that room. lie asserted that a
shameless system of imposition was practised or, cite un-
derwriter ; that there was an organised system of preme-
ditated fraud in the guise of claims for particular average
for damages by sea water, which wee rapidly identifying
ilself with ordinary litt.ineee, and against which the
underwriter had no sufficient protection. It was impos-
sible to write goods to any port in the world without
having a claim for alleged sea damage. The extent and
audacity of this system indicated a condition of commer-
cial morality perfectly appellate. Shippers and mat ewe
turers looked not to the profits of markets so much as to
the profit they could extract from the pockets of under-
writers by manufactured claims for pretended sea
damage. It•was necessary to check this nefarious busi-
nese ; it could not, however, be done by the present
safeguards. It was a delusioento consider the law as
affording any protection to underwriters against dis-
honest claims. The extra costs, if successful, which
was very doubtful indeed, and the annoyance, would be
found in nearly every instance to outweigh the amount
of the dishonest claim. Then, again, the system of
agents was rather a favourer of manufactured
claims than an obstacle, because the agents, though
disposed to act fairly could hardly be expected to do so
when it was considered that their duty and their interest
were placed at variance by the mode of payment. It
was the same with the class of persons called average-
staters. They were, with come honourable exceptions,
rather an assistance to the fraudulent claimant than a
protection to the underwriter. The proposition be had
to make was for the meeting to agree to establish a, board
of investigation, to which all doubtful and disputed
claims should be referred. The decision of this board
should be binding, either for the claim to be paid er re-.
sisted, out of a common fund. He also proposed that a
register of claims, the names of parties, and the nature
of the claims, be kept for the use of the members. He
was satisfied that these securities must be afforded to the
underwriter, in order to put a Stop to scandals which
every year were becoming mere prevalent. It was ne-
cessary to have some tribunal to which to refer claims,
and to do that which underwriters could net, or would:
not do for themselves ; and it was equally necessary to
have a register for claims, in order that underwriters
might know who they were who 'dipped theirhastes so.
deeply into their pockets, and also that unserupuloaa.
traders might be warned that henceforward they 1044
be marked and known, and that the source of disheneek
profit, through the agency of fictitious claims for datniagee,.
by sea water, which they had opened for themselves,
would be closed for the future. The speaker then re-
verted to the committee, and suggested slit tliey alumld
be empowered to frame some general rules for the QO4-
duct of portions of the business, and conclud=leenee
ing two resolutions to the effect that it was . Cie,-
appoint a tribunal to investigate claims, and times rew
gister of claims be kept, to which underwriters were to•
have unrestricted access.
Mr. HOPPER seconded the motion, which was put and
declared to be negatived.
Mr. WATTS was quite prepared for this result. He
was satisfied tbat the time was at hand when all mem-
bers—leading members and junior members—must cone-
bine for self-preservation. The same over-trading that
had occurred with respect to Australia, and for whioh
the members had been made to suffer by unprincipled,
shipper* so severely, would soon be repeated, now that
peace was at hand, and speculation and over-trnaing,
with their consequent reaction, might be expected to
go on in their customary round.
• Mr. WILLS thought that the proposition for a board
of examination of claims nes beset with insuperable
difficulties and could not be advantageously carried out.
The other propoeition for a register of claims might be
of use to members, and was worth further considera-
tion. .

It was arranged that the discussion should be reTiroot
by another motion Inr nest Wednesday ► and,. arta a
vote of thanks to the chairman, the meeting &drupe&