PROFITS INSURANCE.

Auckland Star, Volume LIX, Issue 78, 2 April 1928, Page 4

PROFITS INSURANCE.

INTERESTING DEVELOPMENT, In the cabled report of the merger of certain of the businesses of Sir W. G. Armstrong, Whitworth and Co. and Vickci's, Ltd., it was stated than an insurance policy had been taken out insuring profits of the new organisation. This branch of insurance lias developed steadily of late years and referring to it an authority said: There has been a distinct advance (in Britain) in the use of insurances covering loss of profits and standing charges. It is rather curioiw-.that fire and loss of profits insurance have not yet become universally coupled together as (.■finally necessary forms of protection. Both cover the same accident and there are few firms who could emerge from a fire without suffering some loss through tin; total or partial stoppage of their business. But, while fire insurance is regarded as a. necessity, profits insurance is titill looked upon by many firms as a luxury. J'iii t of the reason, one imagines, is that the term "profits insurance" obscures the fact that what the policy really covers, before anything else, is st, Hiding charges. Profits, in these days, may be a luxury, but standing charges have to be met whether the works are stopped or not. 1 h'j real value of a profits policy is that it provides these standing charges, rather than that it ensures a dividend.

I. ndcr the policy obtained by the Arm-fltronn-Vinkerx amalgamation the Sun Insurance Office will enter into an agreement whereby if the profit* of the new company m any year during the five years ♦"! 31 ' m2 ' do not ™>ount to J*iMX),UOO, then a contribution not excclmg £200.000 will be made in each such year. Ihe Sun Officn is entitled in respect ot any sums received by the new company under, this policy, to an appropriation of 40 per cent of the amount of profits in excess of £900.000 in any year hut such appropriation is limited (a) to the «i«n actually paid by the Sun Office under the policy, with simple interest at toe r.tte of six per cent per annum, and ( M to the necessary profit* being earned ■witliin la years from the financial year in respect Of which the last payment under the policy was made.