The Republican journal., 1908-03-05
"lnyestment Of Insurance Premiums.

NOt lOuk SluCc tlo OulGOI VI q AoesNA'No
daily of Maine printed an editorial
favoring the passage of a law requiring
insurance premiums taken in the State
of Maine to be invested in Maine Sc
curities. The suggestion is theoretical
ly so plausible that many are liable to
be misled, under the circumstances.
Fire insurance of itself has not been
profitable to the companies. Their
dividends are paid, as a rule, from the
earnings of their investments. A COM
pany with capital of one million dol
lars, and five hundred thousand dollars
surplus, with large reinsurance re-
serve, also drawing interest, is able to
earn on its investments dividend for
its stockholders.
1t is estimated that the losses and ex-
penses of fire insurance companies with
in the past ~ years in Maine required
9s per cent of the premiums to pay the
losses in Maine. Should you include
the Portland fire of 1866, which ante
dates this, there would be deficit.
Such an extra hazardous business is
entitled to more than ordinary profit,
otherwise, capital would be withdrawn
and more safely invested.
Fire insurance companies must in
vest their premiums in such manner
and in such securities that at mo-
ments notice they will be able to dis
pose of them without loss, or be able to
make loan on them as collateral. The
loss in the San Francisco confiagration
is said to be over three hundred and
fifty million dollars and the loss to in
surance companies two hundred mil
lions. In the case of the Springfield OF
Massachusetts the President sold Sc
curities rather than borrow one mil
lion and six hundred thousand dollars
to pay the losses. The Hartford Dor
rowed several millions promptly, at a
low rate of interest, selling only por-
ton of it's securities to raise the
seven millions required. This applied
to other companies, so that their bonds
were not Immediately thrown upon the
market, which would bave deprecated
them at great loss. Later they were
enabled to increase their capital by as
sessing the stockholders and to take up
their securities without loss.
Had insurance been obliged to invest
the premiums in each State from
Alaska to Maine, how would they have
been able to raise the millions OF dol
lars necessary to care for San Francis
co only? And who knows how soon
another contlagration may occur call
ing for another hundred million or
more?
Fire insurance companies must have
d large holding of saleable securities,
which Maine could not furnish, while
securities of large and well known cor
porations are always saleable, and upon
which if desired the companies can
make temporary loan at low rate OF
interest and thus adjust and pay their
losses promptly.
Not long ago the Legislature of the
State of Texas passed bill requiring
life insurance companies to invest all
their premiums in Texas securities.
They also require companies to have
the securities deposited with the Treas
nrer of Texas, The result was that
nearly all the companies withdrew from
the State and the citizens suffered
thereby for want of insurance.
Should the State of Maine pass bill
recurring the investment of all premi-
ums in State of Maine securities it
would be impossible to supply the de-
mand in such Investments as could be
in quantities realized upon in the mar
kets, either by loan or sale, and many
companies would withdraw from the
State ard leave few to monopolize
the business and charge any rate they
pleased.
Fire insurance is an absolute neces-
sity. The merchant who is not insured
does not have the credit that the mer-
chant who is insured has. In fact,
should you cancel all the insurance in
Maine, the "Black Friday" of New
York would be but a candle, as it would
bring ruin to the inhabitants of the
State.
The insurance commissioners of each
State periodically examine the securi-
ties held by insurance companies and
certify to their strength and ability to
meet losses, so that any citizen OF
Maine who meets with loss always
receives his money, if he wants it,
promptly.
1t is true that many life insurance
companies were investigated, in doing
which the worst of them were taken up
and examined and the integrity and
honesty of their officials found want
ing. This had tendency to discredit all
insurance companies, although the fire
companies were not involved. The re-
cent "Black Friday" tested the banks
of the country. The weak ones, and
those who had been following bad prac-
tees, went to the wall, and today the
reserve and surplus of the banks are