New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1875-05-22
FIRE INSURANCE. SURPLUS.

ARGUMENTS AGAINST THE SURPLUS LAW.
RESULTS IN A SUPPOSED INsTiNCE-A COMPANY LA
DIE TO TOTAL RUIN MORE LIKELY TO DE CARE
FrL THAN ONE THAT Is NOT SECURE.
To the Editor Of The tribune.
SIR: Your editorial of April 2G under the
above heading very properly argues that insurance should
be insurance and that the simultaneous destruction OF
the property and The insurance would be serious II not
ruinous loss" But in furherance of this proposition 1t
extos the merits OF the Surplus law OF Api1 49, 1874 as
though the provisions of that law made the Insurance
stronger on the property destroyed The writer is unable
10 look upon in that light. With your permission he
would put to your readers the question which IS inc
stronger security for the losrr IN large or
the surplus law or the other on The OASIS ot the lo
lowing figures:
KcSDrye for Reinsurance. 5500oo
Reserve for losses under adjustment. 1000
surplus.
In tic latter ease e. e. where the Surplus law has not
been adoptcd there IS oneaif OF the net suu; grote
more for the protection 0 losers than there would be II
c law were adopted then onehaf would he set aside
toward a minimum capital for the BANKRUPT com
pary which would also receive the reinsurance iunl UNI
der which carry the unbun risks, eaN ing the capital
oneaf the net surplus a. only assets at the con-
company giving ito all better for the loser than the one
that reserves onc-half OF It's surplus
But there is much potent reason for preferring
insurance in companies not taking advantage OF the sur
Without tie surplus protection for officers and
stockholders it is the interest OF insurance manacers to
with the lessons Of The Boston and Chicago disasters AS
ever prescn; reminders they not likely 10 De caught
with risks subject fire much in or their sur
plus Their liability in such fire Is therefore easily with
In their of paying and tGey pay dollar FOR dollar
on other hand let tie surplus reserve once exceed
minimum capital of $2Oo,O0O and the cautiousnass OF
insurance managers longer has the support OF the
natural instinct % sci-rrescrva0n. 49,.
The company has then induccment TO take all the
premiums il GET for IL caulot fail OF rather its vital
organization survives commercial failure ana the eip-
ton ia very great crowd risks 10 have millions AT
the hazard OF a sweeping fire. .
In that surplus Is handed over 10 the
manageinent capital for future business together
with the entire Reinsurance for the protection or
rnbrnt risks, and the company goes on svinlmlngy.
Meanwhile lis bugnt-ou poicy-noders, the sufferers
whom yOu truly describe as almost invariably IN eX-
need Of money, may look To the remainder OF the
assets for what LITTLE percentage they may get Your
editorial evidently based upon the supp0siton that the
surplus reserve additional guaranty fund Tor suffer
eIs from fire. 1t is not il is guaranty FOR officers ana
stockholders against having their companies wound mp
If Is set aside for preferred creditors 1t Is not at all like
that provisions OF the law would stand the test OF
the United States bankruptcy courts But ln that can
be tested is well To sItinze heir bearing upon the
value OF the insurance Offered under them, compared
with that which places AL its assets at the risk OF the cur
rent business, with tle closer cr cisn than Ii has re-
ceiyc in the article hich has called for these remarks
Nec York, May 10, 1879. -