business falling within some definite group, such as a described route of travel. In still other instances two or more companies may agree to reciprocate-mutually share in each other's risks, although the respective proportions allowed may be different-as regards all their business wherever written. Such a plan is often used where several companies are under the management of a single office.

Reinsurance "pools" or "syndicates.”—These are share or participating arrangements whereby a number of companies-varying from as many as 10 to 36 in some of the lcading American examples of such agreements in marine insurance-arrange among themselves to share all insurance on a given commodity or on all business within a given territory on the basis of certain agreed proportions. Thus, in the "Cotton Reinsurance Agreement," the distribution of risks is on the basis of an agreed number of shares, each company issuing a direct policy to the insured, and ceding to the other companies a share of each risk in accordance with the stipulated percentages. Some 26 interests are parties to the arrangement, representing a total of 120 shares. One interest, involving four companies, represents 20 shares; another interest, composed of two companies, 20 shares; another interest, representing three companies, 15 shares; another interest of two companies, 9 shares; and still another interest, involving four companies, 8 shares. The remaining shares are represented by companies, two of which represent 12 shares each; one, 10 shares; three, 3 shares; two, 2 shares; and three, 1 share each.

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Other arrangements of a similar nature are the "Cotton Fire and Marine Underwriters," the "Burlap Agreement, the "Lumber Reinsurance Association on the Great Lakes,”

For a detailed discussion of these various " 'pools'' or 'syndicates, see S. S. Huebner: "Marine Insurance, Chapter XIV on Reinsurance Agreements in Marine Insurance."

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the "Inland River Agreement," the "New Orleans River Association," the "American Foreign Insurance Association," and the "American Marine Insurance Syndicates, 'B' and 'C'." All except the last named relate to the insurance of cargo, whereas Syndicates "B" and "C" refer only to the insurance of American hulls. Syndicate B, comprising nearly 50 American companies, was organized to insure American steamships sold by the Shipping Board on the part-payment plan. Syndicate C, comprising over 70 American and foreign admitted companies, was organized to insure all American steel hulls owned by private persons or corporations or in which they have an insurable interest. In each case the risk is accepted by the manager for the Syndicate, and is automatically distributed among all the companies, each taking its allotted percentage.

Excess reinsurance.-Despite the distribution of risk through share or participating agreements, marine underwriters may still be left with a liability exceeding the normal line customarily retained. Such excess liability

may be shifted to other underwriters through so-called "excess reinsurance contracts," which describe definite time and geographical limits and which apply as soon as the original underwriter has an excess liability under all his contracts, including reinsurance arrangements as well as policies issued directly to clients.

Reinsurance covering excess loss. Here the reinsurer's liability is based upon the amount of loss in excess of a stipulated sum and not upon the amount at risk. The agreement is to the effect that no claim is to be paid by the reinsurer unless the original company has paid or becomes liable to pay to its policyholders on account of loss by any one disaster, a sum exceeding, let us say $50,000, and then for a sum not exceeding $100,000 upon the excess thereof. The chance of loss under this type of reinsurance

contract, it must be apparent, is considerably less than under other forms of excess reinsurance, the risk depending upon the amount of loss which the original underwriter agrees to assume before making a claim under his reinsurance contract. The reinsurer is liable only for losses in excess of this figure, and except in rare instances, does not become liable for partial losses. In this respect it differs from excess reinsurance based upon the amount at risk, where the reinsuring company is a coinsurer in the sense that it must pay losses in the proportion that the amount insured under the reinsurance contract bears to the total insurance granted by the reinsured company on the property in question.

Application of the Reinsurance Contract to the Original Insured. By the great weight of authority the insured (the owner of the property) is regarded as a stranger to the contract of reinsurance, unless it is specifically agreed that he shall have an interest therein. In other words, when one company reinsures the risk of another, the contract is considered as having been made only between these two companies, and the reinsuring company is liable only to the reinsured company and not to the policyholder. If property owner "A," for example, insures his property for $50,000 with Company "B," and "B" reinsures $25,000 of this risk with Company "C," then "C" will be liable only to "B" and not to the policyholder, "A." In case "B" should be insolvent, it follows that "A," in case of a total loss, cannot collect the $25,000 directly from "C." This sum will be paid to the bankrupt concern and when merged with the other assets for the general benefit of creditors may somewhat enlarge the dividend paid to "A" as a creditor, but he will nevertheless suffer a loss.

State Regulations Pertaining to Reinsurance.-Adequate reinsurance facilities, resulting in a proper spread of business, are of supreme importance to sound under

writing. The great majority of our states seem to have made it unnecessarily difficult for companies to enlarge their reinsurance facilities with other American underwriters. In 19 states, insurance companies are limited in their search for reinsurance facilities only to companies that are authorized to transact business within the individual state under consideration. Twenty-five other states permit risks written within their jurisdiction to be reinsured with non-admitted companies, but in nearly all instances, subject to severe restrictions, such as a refusal to permit a ceding company any reduction of taxes where the reinsurance is effected with a company unauthorized to issue policies in the state. Numerous states allow no credit for either taxes or reserve liabilities where reinsurance is ceded to non-admitted companies. Some states allow reinsurance to unauthorized companies only when the facilities of admitted companies have first been exhausted, and require an affidavit to this effect from the ceding company. Three states require the direct-writing company, when ceding insurance to unauthorized companies, to pay a higher tax on the business ceded than the usual premium tax imposed.

The foregoing gives unmistakable evidence that American legislation with respect to reinsurance has been narrow and restrictive in character, and is out of harmony with the prompt, convenient and economical distribution of large risks so necessary in modern business. To enlarge the reinsurance opportunities of American companies, the law of New York and Massachusetts provides that every insurance or reinsurance company, authorized to transact insurance or reinsurance in the state under consideration, is permitted to reinsure any part of an individual risk with (a) a company licensed in the state, or (b), and this is the important feature, a company licensed in any other state of the United States which shows the same standards of

solvency as would be required if it were at the time of such reinsurance authorized in the state under consideration to insure risks of the same kind as those reinsured. Such a plan also received the endorsement of the Federal Government in the Act of March 4, 1922, for the regulation of Marine Insurance in the District of Columbia.