COMPARISON OF BRITISH AND FOREIGN FIRE INSURANCE METHODS. By Mr. E. B. HILES. A Paper read before the Insurance Institute of Manchester, 15th March, 1907. IN considering the scope which is to be assigned to the word Foreign in the title of my paper, as ordained by the Committee of the Federation, I have decided to treat Foreign as including Colonial, and in so doing I am following the example set by almost all companies, who consider their Colonial business as forming part of their Foreign business. Now, when we come to compare Foreign with Home business, one radical difference at once presents itself. In this country there is absolute freedom of Trade in Fire Insurance. Any Company or individual can carry it on without being compelled to make a deposit or give any security for the fulfilment of his or their obligations. It is not so in many Colonies and Foreign Countries. The Colonies of the Cape, Natal, Transvaal, Orange River, and Dominion of Canada all require Deposits to be made by Fire Companies, as do four of the United States, Spain, Mexico, Argentine Republic, Chili, Brazil, and Japan, and an attempt was lately made by Turkey to exact a similar requirement. New Zealand requires a certified statement of accounts annually, the form being a partial imitation of that used in the United States. All the States of the Great Republic across the Atlantic require a statement of accounts annually, in which the securities are re-valued every year and numerous replies are exacted as to sums assured and re-assured, amount of risks expired during the year, etc., etc. Another very onerous requirement in the United States is that the Trustees of the Company, who must be United States citizens, must hold sufficient securities to equal the amount of unearned premium on the unexpired risks, calculated according to a complicated method, and this in addition to the deposits. The effect of the deposit Laws, in the various Colonies and Countries, is that a Company wishing to commence business in all of them would require to put down a sum of at least £200,000. Another important difference is seen in the manner of conducting the business. Home business, apart from that conducted by Head Offices, is in charge of Branches, the Managers of which are fully-trained Insurance men, exercising an effective control over their Agents, whose operations can be known and controlled within the course of post. On the other hand, the Foreign or Colonial Agent is practically debarred from consulting his Head Office regarding the minutiae of his business, and therefore precise limits to his powers have to be assigned and detailed instructions have to be given to guide him in the conduct of his Agency. The Foreign or Colonial Agent derives his authority from a Power of Attorney under the Seal of the Company. This Power, after stating that the individuals named in it are appointed the Agents of the Company, goes on to declare that they are authorised to accept risks and issue Policies, and settle losses, either out of funds in their hands or funds obtained by drawing on the Head Office, and the Company ratifies and confirms whatever they may rightly do under the Power. The Power includes authority to sue and be sued. Some of the British Colonies require the Power to declare that the Grantors ratify whatever shall be done between the time of the revocation of the Power and the time of such revocation becoming known to the holders of the Power. Most Companies limit their Agents to the issue of such Policy forms only as have been supplied from the Head Office. This is a very desirable provision, as it settles the terms and conditions on which risks are accepted. Such a limitation is especially necessary when, as in some cases, the Acts of Parliament or Deeds of Settlement of Companies declare that any Policy issued by a duly-appointed Agent out of Great Britain is valid and effectual. The instructions given to a Foreign Agent are usually contained in a printed book, which may run to between 20 and 50 pages quarto. This book gives the Agent instructions as to taking proposals, enquiring into the risks, and issuing the Policies, and as to renewals, also as to the mode of settling losses and drawing on the Company. Of course, in the case of an Agency in a locality for which a Tariff has been issued by the F.O.C., the Agent has to be supplied with a copy of the Tariff. One feature which claims notice here is the Policy form used by the Companies in Foreign Countries and Colonies. By recent legislation of the Fire Offices' Committee a uniform Policy is issued by all the Companies on Foreign risks accepted in the United Kingdom and by the Agencies in India, Burma, Ceylon, the West Indies, the Guianas, British Honduras, and Ecuador. This form, while ensuring uniform conditions and practice among the Companies, has been found capable of improvement in certain particulars. The clauses dealing with losses by fires caused by war, insurrection, and earthquake were not a fortunate piece of drafting, and steps have lately been taken to improve them. The views enunciated by the Courts of California in the year 1906 show that an earthquake clause cannot be too stringent in its terms; and the Offices have lately deliberated upon an earthquake clause much more definite and stringent in its terms. It could have been wished that a clause could have been agreed upon declaring that immediately an earthquake occurs the Policy shall become void and remain of no effect for a certain period after the earthquake-say, from three to seven days-so as to eliminate all possibility of being made liable for any fire caused directly or indirectly by earthquake. The provision regarding non-liability for fires caused by warlike operations or the action of rebels cannot be too clearly drawn. As altered it now declares that the Policy is suspended during war and civil commotion, unless proof be given that the loss did not arise from warlike operations or civil commotion. And here, I think, it would not be amiss to record that, so far as I am aware, no British Company paid any loss arising from the fires caused by the bombardment and subsequent rioting in Alexandria in 1882, by the military operations in China in 1900, the insurrection and subsequent military operations in the Philippine Islands in 1898 and following years, and the South African War of 1899-1902. K The terrible effects of a modern bombardment in causing fires are such that no precaution, however minute, is too great for the Companies to take in order to make their non-liability clear beyond cavil. With these preliminary observations, let us start out on our journey and cross the Channel to France. And here at this point I have to express my thanks to the Editor of the Review" for allowing me to quote, for the purposes of this paper, from an exhaustive article which appeared in that journal in 1887, dealing with business in France. The interest taken by the Editor of the "Review" in the various Institutes and the Federation is well-known, and on this ground also his permission is gratefully acknowledged. There are about 30 Companies in France, some of the existing Companies dating from 1816, immediately after the fall of Napoleon, but we shall see later on that Napoleon left his impress on Fire Insurance as on everything else in France. The law in France requires that at least 20 per cent. of the net profits must be set aside every year to form a reserve fund, until this amounts to one-fifth of the subscribed capital; that the funds must be invested in State securities or certain Railway bonds; and the law lays down that certain particulars as to the maximum amount accepted on one risk and as to the conditions under which the Company may be dissolved have to be given to each insurer. The Policy form in France is different in many respects from that to which we are accustomed in this country. It is generally printed quarto size, and the conditions are somewhat lengthy. They exclude certain things from the insurance unless specially mentioned, and they also exclude losses caused by invasion, insurrection, and riots, and also by volcanoes and earthquakes. Generally, policies on buildings and contents of houses and factories are issued for a term of 10 years, and the insured can be compelled by law to pay his premium annually unless he gives three months' notice of his intention to drop the policy. Similarly the Company, if it wishes to rid itself of the risk at the end of any year of the ten, must give three months' previous notice. Every French policy, whether on buildings or contents, is subject to pro rata average. The taxes levied on Insurance in France are at the following rates:-£6 per million pounds of sum assured, now proposed to be raised to £10 per millon, for Fire Brigade purposes; about one penny per £100 sum insured for stamp duty, and 11 per cent. on the Premiums for registration duty, all these taxes being collected from the insured. The policy is issued in triplicate, each example being exactly like the others. One is kept by the insured, another by the Company, and the third by the Agent. We will notice the effect of the Code Napoleon on Fire Insurance. Articles 1382-1383 and 1384 of the Code run as follows:: Any act whatever which causes damage to others makes the person by whose fault it has arisen liable to repair that damage." "Each is responsible for the damage which he has caused not only by his act, but also by his negligence or imprudence.' "Each is responsible not only for the damage which he causes by his own act, but also that which is caused by the acts of persons for whom he is responsible or by things which he has under his care." This Under these regulations the owner of property or goods which are burned may under certain circumstances be made responsible for the damage sustained by his neighbours through the burning. This is called the "Recourse by the Neighbours." To obtain the benefit of this recourse it is necessary that the neighbour prove that his loss was caused by the fault of him on whose premises it originated. recourse of the neighbours against a man is covered by insurance, and as the onus probandi is on the neighbours, and not on the man himself, the liability of the latter is covered at one-fourth of the ordinary rate of the property. No insured can recover under his policy and also claim against his neighbour, as such action would make the insurance a source of profit which is contrary to French law. If a Company pay a loss it is subrogated into the right of its Insured, and may bring an action against the person who caused the fire. The liability of tenants to their landlords is also laid down by Articles 1733 and 1734 of the Code. They read as follows: "The tenant is responsible for a fire unless he proves that |