The herald., 1898-05-26
OFFICE OF THE HERALD,
LOS ANGELES, May Is. 1898.
when words are scarce they are sci
dom spent in vain"

LO6 ANGELEbs may 20 1885
'when words are scarce they are sell
dom spent in vain"
The fire insurance situation in New
York Is still in a condition that Is liable
to cause considerable disquiet in other
commercial centers. A break in rates, re-
sulting in utter decentralization, may not
be considered as matter Of grave import
ance when 1t affects only small city OF
even q place us large as San Francisco,
but when the metropolis of the country is
affected and rates are practically demol-
ished, the resultant effect is one that will
be watched with the keenest interest
throughout the whole country, not only
by insurance men, but by insurers, who
are by far the more numerous class.
A gamble on writing insurance below
cost may be successfully conducted by all
the fire insurance companies when the
light Is confined to q limited field, but when
the arena is transferred to New York, the
largest commercial center of the COM
pany, the case is entirely different and 1t
may be taken for granted that If the fight
- at all prolonged none but the big fish
Will be able to swim. The latest informa-
ton as to the condition Of the insurance
market is contained in the New York
Post, which says:
Underwriters are still at a loss to know
what to do about local fire insurance rates.
Some who have hitherto been regarded as
possessing unusual underwriting ability
have fallen In the estimation of many since
the Tariff association dissolved. They
have been apparently unable to cope with
the difficulties of an open market, and are
protecting" their business at the risk of
an enormous loss later on. Others have
added to their reputation as conservative
officers, and before the fight is over the
wisdom OF their course may become appar-
ent to all. The present trouble has served
rs an object lesson to underwriters at
other centers, and tariff associations gen.
orally have been strengthened, rather
than weakened. 1t is thought, by the COM
plications in this city. Stockholders are
becoming somewhat concerned over the
situation, and inquire anxiously as to the
likelihood of dividends next year.
Few property owners appreciate the eff
feet of the present Generalization on the
reserve which fire insurance companies are
obliged by law to maintain for their (poli
cy holders) protection. A company ac-
cepting one month ago an annual policy
for $4,000 at per cent rate received 500,
and placed $50 Immediately in its reserve;
today 1t would take the same risk for $40,
reserving but SO. Thus, with the same La
bility incurred, but one-fifth of the amount
formerly considered essential is held for
pany with $500. 900 liability. for which it
received $5,0O0,OO0 in premiums, reserving
$2,250 900 for the protection of policy hold
ers, Is in a different position when it as
sumes the same liability for premium
Of 81 ,000, OO0 reserving but $450,000 for policy
holders. These facts are little thought of
in the rush for low rates, and although the
loss ratio in this city for year or two has
been favorable, great conflagrations are
still possible, and fire in the dry goods
district tonight might wipe out in forty
minutes profits which most companies have
been years in accommodating.
The large companies are doing an enor-
nous business. Several have to work their
forces overtime to keep up with the rush.
Policies have been Cancelled by the thou
sand and rewritten at rates that would
have been laughed at month ago. Com
panies depending most on their local bust
ness are the worst sufferers. A well-known
manager said he was willing to pile up
heavy liabilities on non-hazardous bust
ness at very low rates. The fight was on
and he was in it. not to make money i'm
mediately. but to prepare the way. for
profits later on. This view is shared by
others and explains the attitude of several
companies to much of the business that is
being offered.
A well-known officer said: Railroads
do foolish things in the presence of Sc
we're competition, and we are going through
the same ordeal today. The companies, of
course, know what rates will return fair
profits, but those which have been i'm
properly deprived of their business through
bad faith in the ranks of the Tariff asso-
citation are offering inducements to win
back old connections. Heavy losses may
be the rule for time, but the large COM
panies will profit, think, in the end. We
may never live to see another tariff asso-
nlrtt@ F@H
organization undertaking as much as the
old one did"