New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1875-04-26
FIRE INSURANCE. SURPLUS.

variety OF interests lnNOiScu III ipoA p
erty. and tho numbers of people affected by us
loss. il becomes evident that the public Is moro
deeply concerned in the stability of fire insur-
ance companies than they are themselves. 10
the stOckhOlder in an insurance company tno
risk of loss is that of his investment, when Is
probably only o fraction Of his entire prop
erty to the insurer when great catastrophe
like that of Chicago Overwhclms the coinpa-
MES. there ia liability to loss that may sweep
away his last dollar The insurance history OF
the Chicago fire has never yet been told. IL Is
very far yet from being complete. The compa-
MES that went into tho hands of receivers nave
not. even mt tho present time, COM
pletcly settled their accounts. Years ago IL
was ascertaincd about how much property was
DESTROYED at Chicago, and how much oil IL was
under insurance; but to this hour II Il not
known how much of that insurance can be
paid, nor can the heavy loss OF assets which
has occurred since tho fire yet be estimated
the loss occasioncd to insolvent companies III
| the hands of receivers.
When o fro has taken place, the owner or
the burned property is almost invariably In
extreme need Of money. llo usually wants 1t
~ he has never in his life wanted 1t before.
The more extensive tho fire, tho greater and
more widespread is this need. II Is not met
at all by claim against company That goes
| into the slow settlements OF the law. Espe-
cially IA It not met by claim against assets
that arc whitening away in the hands OF Il re-
ceiycr. With such result, insurance il
not worthy OF tho name. Yet until tue
passage by the New-YOrk Legislature OF the
act known as the "Surpus law" on April liz,
1874, there was no provision for this contln-
eency. 1t YVES and is a recognized fact that
tho burning of q few blocks Of buildings III
! the dry goods Quarter of New-fOrk would pro-
duce as complete bankruptcy with large
number of our companies "a did the fire OF
Chicago. At best, the history of fire insurance
in this country is chcckered by periods OF heavy
loss. interrupting ut intervals what were
otherwise very profitable business. AT
tho present hour il seems to have reached
the culmipation of one of its most prosperous
pcriods. The accumulated profits Of the conf
NAMES of small capital, in many instances, have
been recently OVERLOOKING into the pockets OF
stockholders, while all tho concerns that sur
yived tho disasters OF Boston and Chicago
| have to o considerable extent, retrieved their
position. Now, just before tho tide turns, Il
| their great opportunity to put themselves In
condition of permancnce and safety. No bet
ter method of achieving this purpose has ever
been invented than tho provisions Of the Sur
plus law.
| Some recent criticisms of the workings OF
thi, law have been put forward tending to
| obscure matters in themselves simple, AMI to
create the impression that its results vera un-
fair to the insurers. Briefly stated, the adverse
argument Il this: Certain surplus funds are
set aside. ont of the reach of the company, to
be used only when some great cOnhagratlOn
oyerwhrlms it. Half Of this amount 80 re-
served, with all OF the capital and all undi-
vdcd profits, goes to pay tho immediate
loss without the costs and delay OF
receiver. The other half reserved for
this emergency of an overwhelming fire,
can then and only then be used for
continuing tho life of the company; it at once
becomes applicable to losses subsequent to the
great fire. Now, say the opponents Of the
law, the losers by the great fire arc deprived
of this latter half of the surplus. This, it is
argued il grave injustice. Bit to this there
are several answers. each Of which ID sufficient.
The accumulation Of this fund which is TO keep
the company on is feet IL chiefly in COLI
sequence of the law itself. OF course as large
! ~
but the process is not compulsory. nor so sure,
nor docs it begin so early. The immediate
settlements made by company still continu-
| ing in Business must be Of UNNECESSARILY mere
service to the losers by great fire than de-
pcndence on what they can get from concern
in bankruptcy. With the ruin Of the organ
| izaton, the largo item of premiums in course
of collection is usually obliteratcd, and it may
he fairly estimated that the loss of assets during
rcceivcrship will amount 10 more than the fund
reserved by the Surplus law to keep the COM
pany alive. Moreover, the insurers that do not
lose 10y the grea. fire have large interests need
ing continued protection. and their rights
should be respected their insurance or their re-
turn Of premium amounts to little after going
through a receivers hands. Taking also the
! broader view Of the case. that every loss makes
the community on Which it falls by so much the
poorer, we perceive that tho ruin of an insur-
ance company extnsuisbes u large amount of
wealth, aside from its lost capital and sur
plus and dues In course OF collection. Its bust
ness lias usually cost nearly % third Of what
ever was received in premiums; what in MGR
camille phrase il known as the good will the
good name that il better than richcs-is real
wealth, and its destruction i. actual AMI wide
spread loss.
| We do not propose 10 recite here all the adj
vaDtagcs that are gained and all the dangers
that are avoided by Submission to the Surplus
law. Yet there is one additional feature
50 important that it deserves special men.
ton. Under previous laws. companies miy
add their surplus to their capital, and
| n