the new companies. Fire managers realized that to conduct a reinsurance business satisfactorily a large capital was needed and only a small rate of profit could be expected.
Before the war, fire-insurance companies had been disturbed, to some extent, by the activities of militant suffragists who set fire to many buildings, including churches. These dangerous activities were to be far exceeded by those of Sinn Feiners after the conclusion of the Armistice with Germany. Immense damage was done to property in Ireland during the course of the campaign of destruction. Insurance companies did not admit responsibility for such damage, special legislation in Ireland providing that the damage could be made good by the local authorities. In the United Kingdom the question of damage of this kind was brought to a head by the destruction of much dock property at Liverpool at the end of Nov. 1920 which was traceable to a Sinn Fein plot. The attitude of the insurance companies generally was that, acting on legal advice, they paid claims under the special riot and civil commotion policies where these had been effected. Where no such special policies existed, or the amount insured under such contracts was insufficient, the loss, or balance of loss, was met under the ordinary fire policies. The insurance companies did not admit liability under such contracts and said that it might be necessary, in order strictly to define the legal position, to take the matter before the Courts.
At the same time, while the insurance companies continued to incorporate in their ordinary fire policies a clause excluding liability for loss or damage caused by riot, civil commotion or military or usurped power, they were prepared, either by the issue of special policies or by the endorsement of existing contracts, to undertake such liabilities, except in the case of Ireland. It is now possible to obtain full protection in respect of the risk of loss or damage by riot, civil commotion, military or usurped power (other than that caused by a foreign enemy), strikers, locked-out workers, or persons taking part in labour disturbances, or malicious persons taking part or acting on behalf of or in connexion with any political organization. In some cases the additional cover is granted for the same rate of premium as that previously charged for riot and civil-commotion risks alone. The risk of fire in respect of private dwelling-houses is included in the ordinary fire policy without extra charge, but, as a rule, a small additional premium is quoted. The wording of the clause giving protection against exceptional risks was, it will be seen, devised with the Irish trouble in mind. It was intended to give complete cover to the assured against risks which were definitely excluded from the ordinary fire policy or might be held, by legal decision, to be so ruled out. A very large number of such special insurances were effected by business men.
Marine Insurance.—In marine insurance the dominant feature of the decade 1910-20 was the demand for war insurance, especially during the period of hostilities. The war cloud was affecting business and was a subject of discussion before the storm broke. In a speech at Copenhagen in 1913, Sir Edward Beauchamp, who was then chairman of Lloyd's, made a stir by indicating what would happen if war with Germany broke out. He then declared that, in any event, British underwriters would stand by their contracts. This statement was considered by some to have gone rather far. Yet British insurance companies transacting business in Germany caused statements of similar effect to be published in German newspapers. The subject had in previous years been discussed in German newspapers, an article, in particular, appearing in the Neue Hamburgische Börsenhalle in Aug. 1905, under the title of “English Insurances in the event of a German-English War.” Its intention appeared to be that of creating uneasiness in the minds of Germans who had effected insurances in England. Confirmation of the attitude adopted by British underwriters was provided by Section V., Annexe III., Paragraph 16, of the Treaty of Peace, which stated that “where the risk had attached effect shall be given to the contract, notwithstanding the party becoming an enemy, and sums due under the contract, either by way of premiums or in respect of losses, shall be recoverable after the coming into force of the present Treaty.”
The ordinary policy covering hulls against the risks of marine perils excluded the risks of war. There was, however, in the years immediately preceding the outbreak of hostilities, a tendency on the part of banks to insist that the risks of capture, seizure, detention, etc., should be included. There was a small number of underwriters in the London market who made a feature of war-risks insurance. They studied the political barometer closely and, as regards rates of premium, set the pace. Other underwriters who were by no means enamoured of war-risk business felt obliged to accept such insurances on similar terms for fear that, if they failed to do so, they would lose the ordinary marine-insurance business. On the whole, the acceptance of such insurances proved profitable.
Reference is made in the article on Shipping to the establishment of war-risk schemes by the British Government immediately on the outbreak of war. While these schemes continued in operation and were of immense value, a large amount of war-risk business was transacted in the open market.
Some of the difficulties facing underwriters were indicated in a case which was taken up to the House of Lords and became known as the “Restraint of Princes” case. The facts were, briefly, that a steamer, bound from South America to Hamburg, was stopped off the Lizard on Aug. 9 1914 by a French cruiser and was told to proceed to Falmouth. There her master received orders from the naval officer in authority to proceed to Liverpool to discharge. This he did. The owners of the cargo gave notice of abandonment, which the underwriters declined to accept. The old form of marine-insurance policy included among the risks covered “takings at sea, arrests, restraints and detainments of all Kings, Princes, and People.” Mr. Justice Bailhache in the first Court, the Court of Appeal, and the House of Lords decided that a declaration of war involving the abandonment of a voyage was a “restraint of Princes,” and entitled the assured to claim a constructive total loss. The underwriters had maintained that actual exertion of force was necessary to constitute “restraint of Princes,” and that they insured the safety of the goods and not the success of the venture. They urged that, until the action was brought, there had been no suggestion by merchants that “restraint” meant anything but forcible action, which they themselves understood it to mean. In the case which was heard before the Courts the cargo arrived safe and sound at Liverpool. It was the venture which was not carried out as was expected. After this decision underwriters adopted a practice of modifying what was known as the war-risk clause. This had read:—
“Warranted free of capture, seizure, and detention, and the consequences thereof or any attempt thereat, piracy excepted, and also from all consequences of hostilities or warlike operations, whether before or after declaration of war.”
For the words “and detention” in this clause there were substituted, after consultation with eminent counsel, the words: “arrest, restraint, or detainment.” The opinion was afterwards expressed that, had merchants realized what the law on this subject was, as it was afterwards defined, underwriters might easily have been ruined, for a vast number of cargoes might have been abandoned to them. Yet there was another point of view. As events occurred prices of all commodities rose enormously in the United Kingdom. Consequently, had cargoes been abandoned to underwriters, the latter should have been able to dispose of the commodities at a handsome profit. Further, to meet the new situation a clause was inserted in all policies covering war risks which ran as follows:—
“Warranted free from any claim arising from capture, seizure, arrests, restraints, or detainments by any British Government or their Allies.”
This clause was based on one which, soon after the outbreak of war, had been inserted in all insurances against war risks on neutral cargoes in neutral vessels and had read:—
“Warranted free from any claim arising from capture, seizure, and detention by the British Government or their Allies.”
The intention of this clause was that neutrals should not collect from British underwriters moneys for goods or vessels which the British or Allied Governments found it expedient to capture, seize, or detain. In one way and another underwriters were able to assist materially in the conduct of the blockade of Germany. In a striking paper read before the Institute of London Underwriters by Mr. E. L. Jacobs, underwriter of the Alliance Assurance Co., it was pointed out that on a hint that the insurance of certain articles was inexpedient, no insurance was provided. Mr. Jacobs declared that: “No proclamation was necessary. A verbal message sufficed: No insurance, no finance, no shipment. Very simple!” A simi-
