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whatever may have been the attitude of individual traders at the outbreak of war, the neutral countries now seem intent on husbanding almost all of their supplies for home consumption, for the extraordinary rise in freights, coupled with additional insurance charges, has rendered the imports of all commodities a very expensive matter for them. All the duties outlined have been carried out by the British Navy in addition to their work of protecting this country from invasion and convoying troopships.

The work of the Fleet has been ably seconded by the State War Insurance scheme. For years State War Insurance had been an academic subject. Committees have sat and voted against a Government scheme. Mr Austen Chamberlain's Committee in 1908 found that the objections to a Government scheme were greater than the advantages that might be expected. A sub-committee of the Imperial Defence Committee again considered the subject and last year reported that the conditions had undergone great changes since the earlier Committee sat; and it prepared, after consultation with experts, a scheme of its own. In normal circumstances the scheme would probably have been issued for public discussion this autumn, as it was thought that such proposals as were outlined should be ventilated in times of peace. No foreign susceptibilities could thus be hurt; and the scheme, if it were endorsed by public opinion, could be put into operation at once in the event of war. Probably at the end of July the White Paper outlining it was lying in a pigeon-hole in a Government office; when the war cloud burst it was extracted, and, within three or four days, the whole plan was launched.

Experience has amply vindicated the wisdom of putting the scheme into practice at once. In the few days immediately preceding the outbreak of war between this country and Germany very high rates were being paid by merchants for insurance against war risks, but immediately after the opening of hostilities, while underwriters were facing the new conditions, merchants could obtain the insurance they wanted at the Government Office. It is certain that a large proportion of the trade could not long have afforded to pay the high rates asked before war involving this country had actually broken out. The establishment of the Government Office for the insurance of cargo had instantly a steadying effect. The authors of the scheme recommended that the maximum rate on cargo should be 51. 5s. per cent., and the minimum rate 1l. 1s. per cent.; and, when the Office opened its doors for business on the afternoon of Aug. 5, the 51, 58. rate was quoted. This meant that merchants all over the world knew the highest rate which they would be asked to pay, and they could make their calculations accordingly. Gradually the Government rate was reduced, until on Tuesday, Sept. 1, it fell to 21. 2s. per cent. No change was made for three months; but after the Battle of the Falkland Islands it was reduced to 1l. 10s. per cent. The Office has transacted a very large amount of business during the past few months, but insurance companies and private underwriters have had all the business that they could desire. In order to compete with the Government Office it was necessary for them to quote rates at least as low; and that they have been able to do so is a sign that the Government rate was intrinsically a sound one. The State Office was established mainly for the encouragement of trade and not with any idea of earning profits; but the Insurance Company or underwriter is in business to make money, and, if it had been thought in the market that the rate quoted by the Government would not leave a profit, the business would not have been accepted.

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There is one important feature of the open market which affects its suitability for providing war insurance. The underwriter is able to withdraw as soon as he thinks he has had enough; and at one time many underwriters did withdraw temporarily from the market. It is, in fact, the prerogative of the strong underwriter to cease accepting business as soon as he thinks he has written all that he wants. He may have collected a considerable volume of premium and then have come to the conclusion that the outlook in some particular trade is not as satisfactory as he would like, and so he decides to become a spectator. He may think that the premiums he has in hand will be sufficient to enable him to pay all claims that may reasonably be expected, or he may even be prepared to face a loss on what he has written. His instinct is to use his skill in discriminating between risks offered to Vol. 222.–No. 442.

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him; and discrimination is precisely what is not wanted if commerce is to be maintained irrespective of the cost. The Government Office is, or should be, affected by no considerations of earning profits. Whether there be good news or bad news, it must continue accepting business at rates which are fixed periodically and cannot rise above the maximum figure. It will be satisfactory if the Government Office remains, as the Admiralty recently stated it was, perfectly solvent; but it would be of no national consequence if it showed a debit balance. It has behind it the whole credit of the country; and a few hundreds of thousands, or even a few millions, would be well spent if they enabled British oversea commerce to be carried on in enormous volumes, and they might be insignificant in relation to the benefits conferred on the country by keeping prices of commodities on a reasonable basis and by maintaining employment.

Yet, though in the light of events it is impossible to imagine that commerce could have been conducted on a vast scale without the support of the State Office, there has been no monopoly. A very large field of operations has been left open for Insurance Companies and underwriters. First, the Government rate has been a uniform one-it applied equally to short voyages from this country to the Mediterranean and to long voyages to ports on the west coast of South America. Underwriters, bound by no scale, have been free to discriminate, and in some trades have quoted very much lower rates than in others. For instance, the rate on cargo across the North Atlantic has fallen to 5 shillings per cent. ; and at rates below one per cent. an enormous business was transacted. After the sinking of the liner Manchester Commerce,' and the discovery of German mines off the Irish coast at the end of October, rates were increased to 15 shillings and 1l. per cent., according to the class of ship. Similarly, low rates were quoted at various times for voyages across the North Sea. One effect of this discrimination was that there was a tendency to take the long-voyage risks to the Government Office, since underwriters were not quoting lower rates and might even have asked more, and to place the shorter-voyage risks in the open market. This tendency reacted unfavourably on the Government scheme, but it had been fully foreseen. Their business,

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they realised, was mainly the encouragement of trade, whether the risks were good, bad, or indifferent.

Secondly, it was part of the State scheme that it should only be applicable to cargoes in vessels from their original port or from the time that they left a port of call. It was, no doubt, felt desirable that merchants should not be able to insure cargo while it was at sea between two ports, lest they should be tempted to do so on the receipt of information unfavourable to the venture. Brokers say, however, that it is not always possible to guarantee that a vessel has not already left port; and merchants may have learned at the last moment of heavier shipments than had been expected. In such cases the brokers have gone into the open market and placed the risks at rates similar to or higher than the Government quotation.

Thirdly, the Government scheme applied only to British vessels, and then only to British ships insured with clubs or associations approved by the Government. There has been plenty of work for neutral ships to do; and the war insurance on the cargoes of these has had to be placed either with the offices established by the respective countries or in the open market. France, Russia, Japan, Italy, Norway, Denmark and Sweden, have all established their own schemes of war insurance. There has been a very large amount of insurance placed in London on produce and merchandise from the United States and other countries to Scandinavia. Suggestions have been repeatedly made that goods professedly intended for Scandinavia were intended to be diverted to the German Baltic ports; and in October London and Liverpool Insurance Companies and private underwriters signed an agreement that all policies of war insurance should exclude the risk of seizure and detention by His Majesty's forces. Important firms of brokers have stated that since that order was imposed a good deal of the business fell off—a somewhat significant fact. The Admiralty announcement respecting mines in the North Sea also had the effect of making underwriters more chary of accepting cargo in vessels trading to and from the Baltic ports. At the end of the year the proposal was made that, in view of the difficulty of preventing supplies from leaking through into Germany, underwriters should

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refrain from insuring any goods exported from neutral countries to the neutral countries neighbouring Germany. One notable result of the war has been that the underwriters have passed through five of the busiest months in their lives. The enormous volume of war insurance, together with the epidemic of insurance against aircraft and bombardment risks, has kept them busy from early morning until late at night. The pressure has been accentuated by the fact that from every large office many men have left to serve in the armies.

Brief reference has already been made to the Government scheme for the insurance of hulls as distinct from that for the insurance of cargoes. For some years past owners had been giving some attention to the war risks on shipping, and new mutual associations had been formed. These associations had been created to provide insurance against those risks of war, riots, civil commotion, which were specifically excluded from the ordinary Marine Policy. There were and are three great groups of associations; but their cover was restricted, in the case of vessels actually at sea on the outbreak of hostilities, to insuring the vessels until their arrivals in British or neutral ports, where they could safely remain. This insurance was obviously of an extremely limited nature and would do nothing to encourage owners to maintain their ships at sea. The existence of the associations, however, did provide the machinery for establishing a complete war insurance scheme. This system came into operation immediately on the outbreak of

It was provided that the Clubs should issue policies covering vessels starting fresh voyages and that the State should accept 80 per cent. of such risks. The maximum rate of premium to be paid by owners was fixed at 5 per cent. and the minimum at 1 per cent. The

. first rate quoted was 14 per cent. for a single voyage and 2} per cent. for the round voyage; within a few weeks it was arranged that vessels should be covered for a period of three months at the rate of 2} per cent. Early in September the rates for the single and round voyages were reduced to one and two per cent. respectively, and the rate for the three months' period to 2 per cent. On Dec. 17 the rate for a single voyage was reduced to 15 shillings per cent., and the rate for a round voyage or

war.

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