REPORT FROM THE SELECT COMMITTEE ON MARINE INSUrance. I. The nature of the exclusive privilege conferred upon the Royal Exchange Assurance and the London Assurance Companies, and the manner and extent of its exercise by those Companies. The SELECT COMMITTEE appointed to con-Resolutions to which these opinions have sider of an Act made in the 6th led them, proceed to consider the subject year of King George the First, inti-in the following natural order: tuled, "An Act for better securing certain powers and privileges intended to be granted by His Majesty by two Charters for Assurance of Ships and Merchandizes at Sea, and for lending money upon Bottomry, and for restraining several extravagant and unwarrantable practices therein mentioned;"-and of the state and means of effecting Ma- to the commerce and revenues of the emrine Insurance in Great Britain;-pire, and to all parties concerned. and to report the same, with their which have been presented to this II. Its effects upon Marine Insurance, and the state of and means of effecting Marine Insurance in this country. III. The importance of a better system I. The nature of the exclusive privi lege, and the manner and extent of its exercise. The act of the 6th Geo. 1. c. 18, provides for the incorporation of the Royal Exchange and London Assurance Companies, for the purpose of effecting Marine Insurances, to the total exclusion of all other corporations or bodies politic, and all societies and partnerships whatsoever, who are "restrained from granting, signing, or underwriting any policy or policies of insurance, or making any contract for insurance of or upon any ship or ships, goods or merchandizes, at sea or going to sea."-Sec. 12. The legislature however even of those times, when political economy was imperfectly understood, apparently distrusting the policy of the extraordinary privileges thus granted, provides for their determination at any period within the 31 years next ensuing, on giving three years previous notice and repayment of the monies which each of the Companies advanced to government; and after the expiration of the said 31 years, a power is reserved to repeal those rights without any previous notice or any repayment, if they should be judged hurtful or inconvenient to the public; but with this de In a country where commerce in all its various branches has been carried to such unexampled extent, where we have so much of the produce of our soil and of our industry to exchange for that of the rest of the world, and from our insular situation so much to exchange among ourselves by the navigation of the seas, and where the most perfect and improved mode of this circulation is so much connected not only with the comforts of individuals, but through the revenue with the safety of the state, no subject can be of more real and extensive importance than that which has been referred to your Committee. Duly impressed with this opinion, they have collected such evi-claration, " that the same corporations, or dence as they thought best calculated to inform them of the present state of Marine Insurance in the country, and to guide their judgments as to any measures which it might be expedient to recommend to the House. The Minutes of this evidence accompany this Report; and your Committee in submitting to the House the opinions which after the most diligent investigation they have formed, and the VOL. XVII. Appendix. any corporation or corporations with the like powers, privileges, benefits and advantages, shall not be grantable again to any persons or corporations whatsoever, but shall remain suppressed for ever, as having been found inconvenient and prejudicial to the public." The sum which each Company engaged to pay Love comment, was 300,000, but they were severally excused the pay(M) ment of one-half thereof by another act of parliament (7 Geo. 1. c. 27, s. 26) from which it appears that each of them had obtained a separate charter for the assurance of houses and goods from fire, but without an exclusive privilege. Thus neither Company paid more than 150,000l. to the public, of which sum 38,750l. was the consideration of their fire assurance charter; so that, in truth, neither paid for their exclusive privilege more than 111,250l. The exclusive privilege of the two Companies rests therefore altogether upon the 6th Geo. 1. c. 18, which provides for its determination in the manner which has been stated. It appears indisputable, that, the Companies having possessed their exclusive privileges more than twice the period of time for which they paid any valuable consideration, no claim can be set up for their continuation, should the House be of opinion that the existence of such privileges are according to the words of the act, hurtful or inconvenient to the public." From the sequel of this Report it will appear that this is decidedly the opinion of your Committee; and should the House adopt their recommendation, to repeal the exclusive privilege of the two Companies, but to preserve to them unimpaired all their other chartered rights, there is every reason to believe that this necessary sacrifice for the general good can be attended with little if any injury to the Companies themselves, as it is not probable that their Marine Insurance business will be diminished below that very limited extent to which they confine themselves. It is not necessary for the present purpose of your Committee to animadvert upon the several inconsistencies of the act by which the two Companies were incorporated; nor to discuss the question, whether the House should hold itself bound by the very singular restriction of the rights of future parliaments, to grant such powers and privileges to any Companies hereafter as might be abrogated from those now existing, because your Committee could not recommend to the House to grant the same exclusive privileges to any Company. large premiums or consideration monies for or towards the insuring ships, goods, and merchandize at sea, having become bankrupts, or otherwise failed in answering or complying with their policies of assurance; whereby they were particularly engaged to make good or contribute towards the losses which merchants or traders have sustained, to the ruin or impoverishment of many merchants and traders, and to the discouragement of adventurers at sea, and to the diminution of the trade, wealth, strength, and public revenues of this kingdom: "And whereas it is conceived, that if two several and distinct corporations, with a competent joint stock to each of them belonging, and under proper conditions, restrictions and regulations, were erected and established for assurance of ships, goods or merchandizes, at sea or going to sea, exclusive of all or any other corporations or bodies politic already created or hereafter to be created, and likewise exclusive of such societies or partnerships as now are or may hereafter be entered into for that purpose, several merchants or traders who adventure their estates in such ships, goods or merchandizes, at sea or going to sea (especially in remote or ha zardous voyages) would think it much safer for them to depend on the policies of assurances of either of these two corporations so to be created and established, than on the policies or assurances of private or particular persons." On enquiring into the manner and extent of the exercise of these rights by the Companies, it appears evident that the intentions of the legislature have been wholly disappointed. Whether these Companies have, as Companies are very apt to do, degenerated from their origi nal principles, it is certain that at present, instead of relieving the merchants as the act supposes they would, from the insolvency of individual underwriters, the whole of their transactions are insignificant, when compared to the general Insurance business of the country; and that instead of affording that relief, as the act again supposes they would, "especially in remote and hazardous voyages," it appears that both Companies seldom insure risks of this description. The charThe motives which induced the legisla-tered Companies do not insure quite four ture to grant these privileges in 1719, are set forth in the preamble of the act, which among other things recites, " that it is found by experience, and that many particular persons after they had received parts out of 100 of the Insurances of Great Britain, so that for the remaining 96 parts the merchants continue exposed to all the consequences from which the act of parliament meant to relieve them. ⚫ From the return made to your Committee of the gross amount of value insured on sea risks by the two Companies, for the last five years, it appears that the average for those years amounts, for the Royal Exchange Assurance Company to 3,720,000l. and for the London, to 1,452,000l. The amount insured by the London Company would be hardly more than a single mercantile house might require, and both added together would not exceed what two of the most considerable individual underwriters would write in one year. That the extent of the Insurances done by the Companies does not amount to four parts in 100 of the total Insurances effected in Great Britain, is apparent from an account which has been laid before your Committee of the gross amount of the Stamp Duties paid upon policies of Marine Insurance for the last nine years. In the year 1800 the gross amount of those duties was 113,4421. 18s. of which 4,076l. 73. 6d. was paid by the Royal Exchange Assurance Company, 1,2791. 7s. 6d. by the London Assurance Company, and 9,21ol. 5s. $d. by Scotland. In the last year the gross amount of these stamp duties for the Metropolis and for Scotland, was 348,592. 15. 104d. of which 8,2091. Is. 3d. was paid by the Royal Exchange Assurance Company, 4,729. 15s. by the London Assurance Company, and 17,136l. 8s. 9d. by Scotland. It is evident that the commerce of the country has very much outgrown the capital, and the whole system upon which these Companies were originally founded. But to clear up this part of the subject, it may be proper to submit some estimate of the insured and insurable property at the present time, compared with the period of the establishment of the chartered Companies. From an account laid before your Committee, it appears that the total tonnage of British registered vessels in the year 1778 (being the earliest period at which the same can be made up) was 1,363,4881. but the tonnage of such vessels in the last year amounted to 2,368,468. The exports and imports in the year 1719 amounted only to 12,202,2157. but in the last year they amounted to 80,708,8231. of official value, exclusive of the imports from the East Indies and China. The extent of the trade and commerce of the empire at the present period, will further appear from the number of ships and vessels cleared outwards and inwards The number in for the last three years. the last year was no fewer than 37,607. The total amount of the sums insured by the Royal Exchange Assurance Company in the last year amounted to 3,905,7551. and the total Insurances effected by the London Assurance Company in the last year amounted to 2,250,000l. to But the total sum insured in Great Britain in the last year amounted 162,538,9051. as will appear from the following statement. The Amount of the 5s. Stamp Duty in the City of London in the year 1809 was 311,787 l.; consequently there was insured to the amount of £.124,714,800 The Amount of the 2s. 6d. Duty was 19,577; consequently there was insured to the amount of............ The 5s. and 2s. 6d. Duties are not And this will leave of 2s. 6d. Duty 15,763,600 6,560,600 992,900 12.721.200 !,9༠5 800 Freight, at £.5 per ton Tonnage of Foreign Vessels, at £.20 per ton, 1,459,046 tons Freight, at £.10 per ton Difference between the tonnage of British Vessels cleared inwards and outwards (3,070,725) for the year 1809, and the tonnage (2,368,468) of registered British Vessels for the year 1809, being 702,257 tons, at £. 10. per ton Freight, at £ 5. per ton Value of Goods carried coastwise, say one-half of the Exports and Imports Value of Foreign Adventures upon British Capital, Irish Insurances, American and other Foreign Insurances effected in Great Britain Total that might have been in 11,342,340 limits they prescribe to themselves may be very wise and proper. 29,180,920 14,590,460 7,022,570 3,511,285 60,531,622 50,000,000 sured, exclusive of Imports from the East Indies and China £.320,927,121 If the above statement be correct (and it is conceived not to be over stated) the total sum that might have been insured in Great Britain in the last year, was 320,927,1217. But the sum actually insured was only 162,538,900l.; Leaving a sum uninsured to the amount of 158,388,2211. Whether the proportion is taken from the stamp duties or the amount of the sums insured, it will be found that the two chartered companies insured less than four parts out of one hundred of the whole insurances effected in Great Britain. It thus appears, that the marine insurance business of these companies is of an extent disproportioned to the demands of the country, and wholly inadequate to the unbounded expectations of the legis lature. Several of the merchants called before your Committee concur in stating, that though they would much prefer making their insurances with the companies, and would pay a higher premium to them than the risk is supposed to be worth by the underwriters at Lloyd's Coffee-house, yet that owing to the cautious system of the companies they are seldom able to deal with them. It appears probable that the companies, by relaxing in some degree the rigour of their terms, might command much additional business. Indeed when it is considered that the capital at first raised by these companies did not exceed 600,000%. and that they carry their fire and life insurances to a much more considerable extent than their marine insurances, the The capital of the Royal Exchange company appears to have been much increased by their success, and is stated now to be worth about two millions. What changes have taken place in that of the London Assurance Company does not appear, your Committee having made no enquiry into that fact. So much, however, is evident, that in the present times, when the value of insurable property of every description is so much increased, the capitals which in the year 1719 were by parliament thought sufficient to afford the public a proper security for sea risks only, in the then contracted state of trade, must be very inadequate to answer the addition since made of fire and life risks, besides the immensely increased value of the property subject to these three distinct species of insurance. And Though, therefore, the cautious conduct of these companies may be proper, and consistent with their interest and with their duties, yet the intention of the legislature in granting them an exclusive right of effecting, as companies, Marine Insurances, are evidently defeated. They do not and they cannot afford any adequate accommodation to the merchants. though these transactions, as far as they go, are of service (and it is not intended by your Committee to recommend any thing to prevent their continuance) yet their right to exclude all other societies and corporations from doing what they can with their monopoly so inadequately perform themselves, appears to be decidedly, according to the words of the act of incorporation, "inconvenient and prejudicial to the public," and as such may and should be repealed. The framers of the act in question seem to have thought that Insurances are best done by companies: whatever may be the opinion of the House on this point at present, there can be little doubt of the absurdity of suffering a monopoly to exist, more effectual in its hindrance than its performance, where such a monopoly can, as in the present instance, be repealed without any violation of public faith. II. The effect of the exclusive privilege upon Marine Insurance, and the state of and means of effecting Marine Insurances in this Country. The most obvious effect has been to drive the business of Marine Insurance into a situation directly the reverse of that intended by the act of parliament; that is, it has been obliged to resort almost entirely to individual security, from the consequences of which it was the object of the act to relieve merchants and traders. Its effect in the city of London has been to compel individuals to assemble together, in order to underwrite separately, while it has prevented them from associating to make insurances jointly. Hence the establishment of Lloyd's Coffee-house, where every person meaning to underwrite must attend during the time necessary for that purpose. But the first merchants in the city of London do not and cannot attend Lloyd's Coffee-house. This exclusive privilege, therefore, operates as a monopoly not merely to the companies, but to Lloyd's Coffee-house. It will appear from the evidence, that the merchants pretty generally complain of the mode of transacting business at the Coffee-house, which, on the other hand, is as generally defended by the underwriters and brokers. Without pretending positively to decide between such contradictory opinions, your Committee, in forming theirs, think it most prudent to confine themselves to obvious deductions from general principles, and from such facts as appear well established. From individuals being prevented from associating as in other trades, much inconvenience must infallibly result both to the insurer and insured, and the security I of the latter must be lessened. The necessity of applying to so many single persons, either for signing a policy or for settling a loss, and the having in case of death no surviving partner to settle with, are, with many other circumstances which it is unnecessary to detail, such obvious disadvantages, that there can be little doubt that partnerships and associations will be formed, if the law should permit it; and at all events, merchants and underwriters, being left to manage their concerns unfettered by any restrictions, will soon fall into that system best suited to their general convenience. It That there is great difficulty and trouble in effecting insurances, may be safely inferred from the singularly high compensation retained by the brokers. appears that they retain for their agency about 25 per cent. of the total balances of premiums paid by them to the underwriters, so that one-fourth part of the total profits on underwriting is received by the brokers. A practice appears to prevail at the Coffee-house, which is the subject of very general complaint among the merchants, During the months of August, September. October, November and December, a great number of the underwriters withdraw from Lloyd's Coffee-house. The merchants ascribe this to a dislike to winter risks. But whether it be from this cause, or, as the underwriters alledge, for the purpose of relaxation, the consequences are still the same. At this season of the year, when the peril is greatest, and when there are the largest sums to be insured, the means of effecting that insurance at the Coffee-house are lessened. The Jamaica July fleet, the latest West India fleet; the Baltic, the Mediterranean, and Newfoundland convoys, the homeward bound East-Indiamen, not to mention the numerous fleets and vessels taking their departure from Great Britain or Ireland, are mostly then at sea, and, with the exception of part of the West India July and August fleets, are to insure in these months. Some opinion of the consequences arising from underwriters withdrawing from the Coffee-house in the autumn and winter months, may be formed from the following account of the sums insured by an underwriter who attended there every month last year: |