New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1875-06-26
INSURANCE MADE SURE.

EFFECT OF THE NETWORK SURPLUS LAW.
CONTRAST BETWEEN THE REQUIREMENTS or THIS
AND oTHRR LAws-A BRIEF ACCOUNT or COM
PANIEs THAT WERE RUIHFD BY THE CHICAGO
AND BOSTON FiREs-ADyENrAGEs SECURED TO
TIE HOLDERS or PouCIIs ~ COMPANIES CNDER
TIE SURPLUS LAW.
TO the razor OF The Trf5Rre.
SIR: The writer asks indulgence for reply
n your correspondents - and NJ who in recent Issue
attempt to controyer your position relative 10 the New
York Surplus law Your response to their CRITICISMS IS
comprehensive and complete their Illustrations are wen
met by and by your statement that the merits OF to
law should be FAIRLY considered, and atN Il hpt I"tr
TO compare the best that company might under ether
laws. with what II must do under the Surplus law
The writer ventures TO rosrass upon your space be-
cause the position Of tho company whose name signed
hereto has been used 70 show alleged defects In the law
10 which II has at much present cost stipulated that IT'S
dividends md business shan hereafter be confornhd
To proper understanding OF the subject under con-
sldelaton condensed presentation n the laws OF the
State relating viii be valuable by statute On
acted prior the great fire OF 1889 IS provided tpo ~
ease OF the bankruptcy of an Insurance company us pro
rata unearnud premiums shaI become preferred elan
upon its assets. This IL most wise and bnehcrnt pro-
vision and Of great value to claimants for losses inc
general insurance law permits companies Co pay cur In
dividends whatever profits they have above the assets
which are 10 meet such pro rata unearued premium a-
blty such dividends cannot exceed ten per rent pr
annum the capital, unless there shall be reserved
sum equal TO the full amount Of premiums received on
running policies renewals. This Is the only restriction
M 70 dividends T1at general law amended IN 1870
50 az to permit had above the pro rata unearned
premium Liability and below tho full unearned premium
liability to be added to the capital That amendment
permits dividends 10 be paid upon such capitalized
amounts, the upon casl-aid capital IL also per-
mlts the OF increased amounts in proportion as
the apita thus nOmnlly increased Tie general law,
therefore, allows the payment of unlimited diFuehosabd
spuaies for increase u security beyond that given
by fun uncaucd premium rcsorve 10 those who Z" not
choose to capitalize; while those who DO it not only
does not supaate tor any relative inelesse OF s,eny,
but does permit large increase Oh dFldohos III proper
ghe surplus law OF 1874 provides that the cashpad
snail be hAcd; addiction 10 the surplus can De capSti-
lied under IT, nor is any Increase o. tnaL surplus 10 %
dcnds hGited 10y the surplus hw ~ seven per cent
upon the capital end also upon me amount al he snipis
funds n.Ied IN the Liv As they are accumulated lhe
cash dividends being ny the SUI Plus Ia" tHS yea
there Is a much earer probability that there VIII be
iornicl The jnrona Of the companies fr,m.taeir invest
mcnis will pay this per cent cash dividend, so at
at least the Whole Of the profits " the business o III
elnce viii 20 10 create md increase tho surpuo funds
recognized by the of So Thce restrictions 70
limitation OF dividends uner the surplus ct are u con
nue u the surplus safety funds are At least equa %
OF the IG5 COT. panios Of tho state, which wore in
sence at tie ond of 1874 70 do business OF such Ok
only That their armed penl uls are not equal to
one-haif their respective capitals IL follows that Their
submission 30 the EW Will secure more money for their
oscaiurnts IN the cyoat Of great tgc than tue gen
eral law provides for, aud tns Is also N1" releeh'e
Ia hIt.c a.'i ns mai mast iosni, Ii" t'r
being kept nnt ~ the bands Of rccelsets and nee from
an the lis that follow bankruptcy.
Tie fires Chicago and Boston sent 100 companies
into bankruptcy, aud placed their estates n charge ~ re
c.iyes. OF tha uumheF about one quarter we're New
York companies, aud OF those very nearly, II uotHut;
all, sti IN The hands 81 RECEIVERS. iLey were AN
policies. aud uutn thOse liabilities were IN great meas
are discharged, tAey coGld maize 10 ial i pa A,ht'
ala of u
assets which neeaine essentially worthless upon their
uInAl '1 ~ v - I ' ID erimenit tiey
taken together, realized but ~ per cent OF the amount
which t,y possessed ON Dee a. preceding Inc Chicago
fire. although, OF tue niue months OI 1874
had added materially to their profits
From ti7 stateng ut %: money realized by the receivers
OF bankrupt COMPANIES, there Is ~ course omitted
amount. collected for interest which accrued after their
bansnipcyi he'e iS not however omitted cams whlch
bonds anl stock unii their prices had materially adj
vilnotd ihe total anOht realized ia one case was De
low r. per cent Of what es>cl on Dee q, 1870
! Ihcv we're an subjected moi only this shrnSage Of
assets hut also 10 tue receivers lees ana eenses ara TO
otir legal costs Iheir creditors rot only suffered II
no receiver, however api1 am h'hest, could a'olu.
THESE creditors needed What due 10 them, a.
they w.ld tLt, nsd a a n ds stcr lId not D,en
every where aDon them. 81 900 paid within 90
% DDS the IRE wOId have beeu worth 10 the most OF
t4em more than huch larger sam raid1hg diter"ani'
receiver at his best eau pay careful act1ala, cal
culdtiou made Inspecting number Of these Now YORK
Indicate. T., thai, they lad Dcen acling under the re-
sncion oi tie surplus law .hey ""dd nave pad uioie
muh.y 40 their losers in the pett fac. TAey wVnd al
course have been able Ia tue greater Sums with the
prudipLucss they nsCd IN ordinary losses
T.e 10 Oat evil attending Insurance ia tho case OF
great fires thai l. beyond e.ectual ieme'ty-that Is
T, pos-,hty that the caiins upun the cOnpalc, cannot
be- piid IA iul 1lis full payment novsr be UlaIe
c.rian Ougit be- fully eVidont, when Il known that
In, va nc of tho merchandise uud bugdugs 81 the New
YORK dry goods district prOhaby at three
times great all OF the cislpaid capitals of all The
companies chartered by or admitted to ne sfhtei tie
Of -lCi capt beng S7J,iOO3GJ There can
De- auUuu OF caspaid capital adequate 10 the
payucn Of all the loss thai may be sustained 10 as or IN
ANY utter great ciiy as Uui Giles are Cons.incOed oueH
auiDant Oi capital wound cessry ueiLlnl me pay
mont greater premiums shan Dlslless CUaid endure,
and ih ioioro hep iausi % eosn, III otne1 d'o.ODs.
ruiiy met and removed oy thc sus law, winch 10
it, vi dividends ana enforce accumulation o
can 6y any other Law be secured There Is mode YET
cred that will accou 81 much IA tnis drectOn
losers enhe cap.ti ald fuzzy One-hau 0 ali III.
prOhs Ol the business aud winch Oy setling apart '
other haii OF such profits, primarily to protect all hOideis
al p0clc> property moi burned AZ te time Ol tile great
cona grafton ana secunlarii 10 the ltrpeinatl0n 81 the
COMPANY secures ID Inc osefS the Iuh sum aPinNoDe
Iaving These convictions respecting tho value OF the
Surplus Jaw, Directors or te Continental Company
upon report UI ape committee largely Interested
opr1ns of the Company the aints OF the law
Taey nagh nave diyaed IN January Last 40 per cent sur
p.ts IA Vck. and added the to their capital. But
,sy did nOi; They did brsseI fOI their custOers. They
m ht by doing tnis have added 40 per cent to thrr an
naal dividends haf tney "'d nn'i tnry an better nor
tncir l,oicy -n0dIs. They received smaller eivrnt
age ur.ng the pt year man they before received
aud huye bound themselves 10 iorego IN unc To come al
leIst tar tcnts OF what they would have been entitled
to by cilaiZ tiOn; AMI ado 20 tOrcgo the opportunity
dividends si further, 10y further capitalism
ton. vita iis right 10 ilssnInc greater risks
II ts resulted IN OInrI that companies nave BY
perqsience dividends, durng O less profitable
yeae reduced by dividends nearly all Df t surplus they
psas>cd uiDNe tier pro- rata unealuci pienignls hud
have far Ia invade thn fund. There
guarantee outside Of the surplus Law that this VIII
again: aud now, while thsy have the iOncy
tie 10 secure II for policy -lOilCrs. II NIL n0i be
ellcl by any sane nin 'iat the 70 cOupauis above NJ
uOing comparatively iinlt.d business, WILL
D, suhussOn to the surplus law. make fer tDe
and fuller payment Of ,s Tie amounts of lTonl>
they now mold winch may under laws be- divided
10 irr stockholders OF COMPANIES. the standard