FIRE INSURANCE. 640 EIRE INSURANCE. portion of the cash premium. This liability varies in different companies from a sum equal to the premium to a sum equal to five times the premium, and occasionally to an even greater sum. Many of the older companies have accumu- lated large surpluses, out of which they are able to pay any exceptional losses they may sull'er. and in normal years to return to the insured in the form of dividends a very considerable part — not infrequently as high as 90 per cent. — of the sum collected as premiums. In the West- ern States in recent years the mutual principle in fire insurance has manifested itself in the es- tablishment of numerous 'town' and 'county' mutual companies. The activity of these com- panies is usually limited to a single town or county. They are very largely engaged in insur- ing the property of farmers. They act on a plan somewhat different from that of the older Eastern companies. Instead of keeping up rates, and using the annual gain to accumulate a sur- plus or to increase dividends, they establish com- paratively low rates. On long-time insurance usually a small part of the premium is paid in cash and the rest is paid by premium notes, The liability of the insured is limited to the amount of the notes given by him. No payments have to be made on these notes unless the losses of the company compel it to make an assess- ment. At the expiration of the term of insur- ance the notes are canceled. In many of the Slates the companies are authorized to count these premium notes as the whole or a part of the legal reserve, and they are to that extent freed from the necessity of accumulating a cash reserve sufficient to reinsure outstanding risks. Lloyds. In the early nineties there were or- ganized in the United States a large number of fire companies on the plan of the English Lloyd-. Most of these companies were located in New York, where a special provision of the insurance law gave them a temporary advantage. A 'Lloyds' is neither a joint-stock company nor, in most cases, a mutual company: it is rather a partnership with limited liability. It is an un- incorporated association of individuals, each of whom deposits a certain amount, and assumes liability for a limited additional amount. In the English Lloyds, where marine insurance is writ- ten, each member of the association does his own underwriting, specifying how much, if any, liability he will assume on each risk offered. In the United States companies, on the other hand, the actual management of the business is put in tlir hands of an attorney, who writes the in- surance. Each member of the association incurs liability on every risk written, in proportion to his slia re in the deposit fund. In case of ln~s tlir deposit fund. and. if necessary, the additional liability of the subscribers, may be drawn upon to meet it. There is no reason in the nature of things why an insurance company so organized should nut be as strong as a stuck company. As a matter of fact, (lie stability of the English Lloyds is above question. The essential thing is financial responsibility on the pari of tin- mem- bers of 1 1n- association. In a great majority "f the American companies this has been lacking. '"t only was the additional liability assumed by tbc members usually of no value, but the de them elves were frequently in tin 1 form of ni.tes. mi which it was found impossible to realize in case of need. In Ww York the Lloyds survived in large numbers only so long as they were able to escape the supervision of the Insur- ance Department. As soon as they were brought under the provisions of the General Insurano Law, most of them disappeared. Of the 125 companies in New York in 1895, not more than 15 were surviving in 1901. During the last few years, however, Lloyds have been appearing in considerable numbers in Chicago under the lax provisions of the Illinois insurance law. A person inclined to seek insurance in the Lloyds, on account of the low premium rates offered, needs to remember that unless the company is organized in a State in which the Lloyds are un- der careful supervision by the Insurance Depart- ment, he has no assurance of the stability of the association. The actual value of the assets of the company may be far below the nominal value. Moreover, as the association is not a corpora- tion, a person having occasion to bring suit against it must resort to the courts of the State in which the association is located. Foreign Companies. Foreign fire-insurance companies, chiefly British and German, write a considerable amount of business in the United States. Many of the States have laws requiring a deposit by foreign companies of other States be- fore licensing them to do business in their borders. Several of the .foreign companies have found it advantageous to do the whole or a part of their American business through subsidiary American companies. Sometimes such a company is di- rectly established by the foreign company; some- times the foreign company buys up an already established American company. More than fifty foreign companies are operating in the United States, and probably write nearly, or quite, a quarter of the entire fire business of the country. Though these companies, in common with Ameri- can companies, have suffered from the unusually heavy fire losses of the last few years, for the ten years from 1892 to 1901, inclusive, they sent to their home offices some $20,000,000 more than they received from them. The excess amounted t.. $4,367,000 in 1896, fell to $131,000 in 1900, and in 1901 was replaced by a net importation of $486,000. Partly in consequence of the unfavor- able results of the business of the last few year-, and partly on account of the tendency in soma States to discriminate against the foreign com- panies, many of these companies show a disposi- tion to contract rather than to expand their American business. Only two States — Connecti- cut and Kansas — actually discriminate between foreign companies and companies of other States. In Kansas the tax is 4 per cent, on the premiums of the former, and 2 per cent, on simi- lar premiums of the latter; Connecticut imposes a tax of 2 per cent, on gross premiums of foreign companies, and has for other-State American companies the reciprocal provision. But while the actual legislative discrimination against the foreign companies is not very widespread or very severe, the possibility of such legislation, an.l the somewhat common advocacy of it, tend to drive the companies away, five such companies withdrew from the I'nilcil States, either wholly or in part, in 1901. Self-Insurance. When many pieces of prop- erty sn situated as to constitute separate risks are owned by a single individual or corporation, the proprietor sometimes finds it cheaper to 'carry his own insurance' than to have recourse
