NEW ZEALAND INSURANCE COMPANIES IN AMERICA.

Lyttelton Times, Volume LIII, Issue 5951, 23 March 1880, Page 5

NEW ZEALAND INSURANCE COMPANIES IN AMERICA.

The San Francisco correspondent of the Otago Daily Tints writes:—; There is a BUI before the California Legislature which is of more than passing interest to New Zealand. I refer to the’Senate Bill entitled “An Act to regulate fire, marine, and inland insurance ili this Btate," introduced by Mr Johnson, of Sacramento, acting on behalf of certain local companies.' And here let me say that the local companies are by no means agreed upon its policy. If enacted as introduced, it would close out the majority of American companies, and drive away many foreign ones. It requires a special deposit of 500,000 dollars in the State before any foreign company could open business, and no company having a less capital paid up than 500,000 dollars could do business at all. This latter provision of course would not affect the New Zealand offices, but the former certainly wbul‘‘. The provision as to capital, however, would be fatal to all but eight of the New York companies, despite their large asst ts, which afford ait ample security, and would drive 16 Eastern offices doing business here out of the State. It should be hero noted as a peculiarity of American insurance companies that-their nominal capital is small, the security being obtained by the distribution of risks. This principle is so well known in the insurance business that it; is not matter of surprise that the preference, as a rule, should be given to foreign over local companies. And the solvency of insurance companies is best guaranteed by the wide distribution of risks, their losses being paid out of premiums and not from capital. The magnitude of the insurance business in the United States, and the possibilities of its unlimited extension, should be borne in mind by New Zealand companies. It appears to me to be the only available ground upon which they can build a stable, paying business, owing to local and British competition. This, point was well taken’ by Mr Dorrin, president of the Fireman’s Fund Insurance Company, in his argument against the bill before the Senate Committee, when he said: “The public good demands for insurance capital the largest liberty of action consistent with safety. The company which receives lOOOdol. per annum from a thousand agencies, whether in California or Illinois, New York or Massachusetts, Nevada or Oregon, is safer against disaster than if its revenue of a million dollars was drawn from a hundred agencies yielding an average of 10,000doL each. The former involves moderate lines, within the loss-paying ability of companies, while the latter indicates a heavy concentration in the larger agencies." Thij is precisely the point, and I think the histo; y of New Zealand insurance demonstrates its truth. The fact that the losses of local companies here for the last decade exceeded in t le proportion of three to two the losses ly foreign companies representing so much more capital, is proof in the same direction. I desire especially to bring this point home to colonists holding insurance stock, because I think the policy of the New Zealand Company in reinsuring 2,oC'o,ooOdols of its country business in this State was unwise. It was a policy of concentration which took over 20,000d015. from their assets, and dissipated the advantages secured by previous enterprise and expenditure. Moreover, it threw discredit upon all New Zealand offices. lam aware that it was a conservative measuro, but it must have been taken without, d ie consideration of the true principles of insurance, which are those of distribution of risks and not of concentration. • The business transacted by the_ Colonial offices here, against prejudice and ignorance and opposition, during the few months of their existence, shows what may be accomplished in the future. For example, the New Zealand Company in four years and nine months has received, in premiums, 623,937d01, of which 472,499d015, was on fire, and 151,438d0l on marine risks. Oregon only contributed 77,090d0i of this total. Now this is a great showing,' and this Company was only becoming really known when the order to concentrate its business was issued. It made a noble stand here, raising Colonial credit and making Now Zealand known and respected everywhere, and it is a pity anything should be done to weaken its influence. The reinsured risks proved' to bo uncommonly safe onos by the way. Then take the South British and Colonial Agency, for its short run of 14 months. The total receipts were 124,989 dols, of which 95,650d0l was for fire risks. Is not this a great showing for 14 months’ run of unknown Colonial: offices in an American city, and what might not be done if, instead of shirking the work by concentration, or taking fright at the hostile legislation threatened in California, these companies took hold of the American Continent, and made their home risks secure by the immense area covered by them r The Standard likewise makes a good exhibit, Laving taken 67,664d01s in its opening year. Here is a sum total of 806,690d01s received by the New Zealand Insurance Companies on this Slope during a very short period, which they would not have got but for opening here. The business is in its infancy, and .should be prosecuted vigorously. The Legislature will not pass the Bill in its objectionable shape, but will take reasonable security from foreign companies. Under the circumstances I think the directors and shareholders interested should resolve to strengthen them agencies and extend their business.