New-York tribune. [volume] (New York [N.Y.]) 1866-1924, 1895-04-11
REFORM IN THE INSURANCE LAW
SUGGESTIONS LOOKING TO a REDUCTION OF TIL
RESERVE FOR NEUTRALITY-SUSPICIOUS.
TO NEW AND WEAK COMPANIES.

SUGGESTIONS LOOKING TO A REDUCTION OF THE
RESERVE FOR MISUNDERSTANDING
TO NEW AND WEAK COMPANIES.
To the Editor of The Tribune.
Sir: In The Journal of Commerce OF March %
attention is called to the fact that under the
present Insurance law of this State ii has been n
possible TO organize joint stock companies. Al
the same time old companies drop out Of the bust
ness. so that at the present time We find there are
only 10S joint stock companies. home and foreign,
represented in New-York. against 49, or ISL only
ten years ago" The article then refers to the
growth of organizations known as "Iloyds, and
adds: IF there insurance capital enough en-
ployed in the business to give protection TO the
property now requiring Insurance, there would be
no need for 'Lloyds.
The law referred 70 requires fire insurance COM
panies to maintain a certain reserve for the REIN
surance of their risks. If this law is inequtable
and destructive to new and weak companies. while
practically imperative old and strong ones
IT would be wise consider such amendments az
while requiring sufficient reserve Will correct ex
listing inequalities
The reserve now required is the whole amount
OF the unearned premiums, without any deduction
for commissions or other expenses and is figured
on the basis of so per cent Of the unexpired pre-
miums written during the year for one year or
less, fve-sixths of the premiums written for three
years and nine-tenths of those written for five
years The three and five year business, consist
ing as it does of risks on dwellings, schools
churches. public and office buildings, fre-proof
structures etc, and their contents. is generally
considered the very OF the business, and
companies freely pay from % per cent to 40 per
cent in commissions and other expenses for the
privilege of writing 1t. AS the law stands the
cash reserve this business is owing to the
penses, which are allowed. very considerably
greater than the cash received. Therefore, a new
company could not compete for ii without provid-
ing itself with surplus in advance. Even then
% hi
solely of this preferred kind its surplus would BE-
reduced each year. even if It did not sustain a
single fire loss. The statement OF one OF our large
city companies. which has an immense long-term
business, proves the correctness of this assertion
Last year its premiums amounted to S3197722 on
its whole business while its reserve for reinsurance
was $5,46.i08. VIII some explain how IL would
Be possible for company pile up a reserve
for reinsurance greater than the amount of its
annual premium receipts without becoming i'm
paired?
But il Is not only the new company which is
confronted with this law which Is practically pro-
hbitory. far as It affects long term business.
Many Of the old and conservative companies have
been forced to abandon the field. far this
business is concerned. and conlne their writings
TO risks that are written for year less. The
result is that the great corporations have practi-
cal monopoly of the choicest business and 1t Is
from them that the principal opposition comes TO
such a modification OF the law as will make It just
and equitable.
The writer thinks that the amount Of the capt.
tai Of company should b. considered in deternin-
ing It's for reinsurance, and that a certain
proportion OF ii should be applied as a portion OF
this reserve. Therefore, he proposes an amendment