New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1871-11-11
THE BASIS OF FIRE INSURANCE.

THE BASIS OF FIRE INSURANCE.
The loss of more than SEC, 100000 of the in
surance capital of this State by the Chicago
fire. as shown by the highly important report
of Superintendent Miller, which we publish
this morning on our second page; the
absolute failure of many FIRE insurance COM
panies, the crippled condition Of others,
and the natural fears concerning even the
strongest that have suffered heavy losses at
Chicago, have combined to produce some gen.
eral sentiment of anxiety respecting the entire
fabric of fire insurance. 1t is generally adj
mitted that, had not recent Legislation in Iii
nois, adverse to the transaction of business in
that State by companies in other States, driven
our companies away from that field, a large
proportion of the insurance companies of New
York would to-day be suffering the fate of
those of Chicago. 1t is an unquestionable fact
that conhagraton of extent equal to that of
Chicago, occurring in this city, would reduce
to hopeless bankruptcy every company here.
Thoughtful men are beginning to ask, OF what
are we certain when our property is insured
| On what basis is this supposed security
| fouhdedf
| The restrictive legislation of this State is
| considered more successful than that of most
Others, and fully equal to any, in preventing
fraudulent or dangerously extravagant insur-
| ance management. But there is a wide scope
within Its limits. The risks Of all the United
| States companies allowed to do business in
New York, last year, were %, 72JOO0 900; and
| their gross assets were but $104,500 Cocoon
| siderably less than three per cent. IL we
understand the published statements, it was
| then possible that New York State company
which the provisions of the law would have
permitted to pay to its stockholders 225 per
cent dlvidend-as it would still have retained
the required reserve-had, nevertheless, risks
to 1870 times the amount Of its entire assets;
and had it made such dividend its assets
would not have been one-half of one per cent
of its risks. The law does not directly regu-
late the proportion of risks to assets, nor is it
clearly evident that it should, since the charac
ter of any risk has much to do with the need
of assets to meet it. 1t would be manifestly
inequitable to compel a company whose chief
business is insurance on private residences, at
premiums of IS to 30 cents per 800, to keep az
large percentage Of assets in proportion to
risks as one that receives SO to S. per 800
for risks on factories and hazardous
goods. The method adopted Is to compel each
company TO retain what is called Il reinsurance
fund, equal to One-hah tile sum of the pre-
miuns on unexpired risks. This is calculated
as adequate to meet all losses. Of the other
half, the greater part goes to meet expenses,
and the remainder is profits. If there is such
mismanagement or loss that company is
obliged. in keeping up the reinsurance fund,
to impair it's capital to the extent of Is per
cent, the law steps in and compels the COM
pany to make up the deficiency Of capital, or
wind up; though it is surmised that COM
pany might avoid either point of the dilemma
by reducing its capital and, thus shorn of it's
original strength, still 20 on in business. If
there be such q loOphole in the law, il needs
consideration. The point, however to which
We propose to direct attention ia the absolute
danger of our oldest and most conservative
Companies; those which had not dollar at
risk in Chicago We will take one Of tAese as
an instance. merely promising that It'll rapidly
approaching it's semi-eentennial, and that few
can show better record. Its capital Is $25O,OOO
its 1(AdditionaD reserve exceeds $fe0OOO, Of
which but ittis moro than $4,000 was required
for its rsinsurance fund. This looks like super
fuous solyencyy yet its $4ao,ooo assets are but
slightly over 4 per cent Of risks, Of which,
presumably, nine-tenths are in and adjoining
this city. II could reduce this proportion. to 8
per cent and still comply with our. insurance
law. ....... ....,. y'.....---. 3. 4
To state the case briefly, security IN FIRE
Insurance "a based upon the condition that the
risks DO 20 distributed that no great less by
ono fire can accfde 70 company. To mako
this security perfect, this limitation 10 small
risks In one place shcpld apply TO . city. q |
town, village. In practice it usually ap-
pics, merely 70 the limitation Of risk In one |
building. or. at bes, In one block Of b. ildinss
This unwise practice L. moreover, In the cass |
OF this city, regarded ss conservation. It Q
fact that the companies esteemed @ safest |
both in insurance circles and by the commu-
nty-doing business In the straight old-fash-
ioned. careful wsy-ars those whose risks are |