Swansea exporting ports, and engaged in the import of ores (smelting), Hull an oil port, and the Clyde, by reason of the proximity of coal and iron, a shipbuilding centre. The seasonal trades of the world should also be known, e.g., the cotton season of the Gulf and Southern Range ports of the United States of America.

CHAPTER XIII.

RE-INSURANCE-TREATY AND FACULTATIVE.

A MOST important sphere of an underwriter's activities. is that of re-insurance. Until 1864 re-insurances, except in the event of death or bankruptcy of the insurer, were prohibited by statute, but since that year the practice has become more and more extensive, and there are to-day many companies which interest themselves only on re-insurances of original lines written by other underwriters.

The reasons operating to cause an underwriter to re-insure part or all of any risk for which he has accepted liability are:

(a) He may not be prepared to retain the total extent of his interest at risk by a steamer. (b) He may have accepted a line on "all risk " terms, and not desire to stand the chance of loss by certain of the risks covered.

(c) There may be a possibility of placing the risk in another market at a rate cheaper than that at which it was written.

(d) The risk may in the underwriter's view be an undesirable one which was accepted in the first instance by an error of judgment.

The right of an underwriter to re-insure is conferred by the Marine Insurance Act, Section 9, which states: (1) The insurer under a contract of marine insur

ance has an insurable interest in his risk, and may re-insure in respect of it.

(2) Unless the policy otherwise provides, the original assured has no right or interest in respect of such re-insurance.

In the event of constructive total loss of the interest insured no notice of abandonment need be given by the original underwriter to his re-insurer [6 Edward VII, Chapter 41, Section 62 (9)].

All lawful marine insurance contracts are contracts of indemnity, and that of re-insurance is no exception (British Dominions Insurance Co., Ltd. v. Duder, 1915). As previously indicated, it is not necessary in a policy of re-insurance to specify that it is such, nor is it necessary to disclose the name of the original insurer (Glasgow Assurance Corporation v. Symondson, 1911). A re-insurer is not liable in respect of any action brought by the original assured (Nelson v. Empress Assurance Corporation, Ltd., 1905). It has been held that a re-insurer is not liable for expenses under the sue and labour clause unless these were incurred by the re-insured (Uzielli v. Boston Marine Insurance Co., 1884), but objection has been made to this finding (British Dominions Insurance Co. v. Duder, 1915).

It is usual to insert in all re-insurance policies the following clause:

"This policy is declared and agreed to be a Re-insurance and to be subject to the same clauses and conditions as the original policy, and to pay as may be paid thereon.'

To this wording in the case of time policies is often added, "Subject to continuation as original, with or without notice."

The insertion of this clause does not make payment of a claim by the re-insured a condition precedent to recovery from the re-insurer (Re Eddystone Insurance Co. ex parte Western Insurance Co., 1892). If in the re-insurance clause the expression "subject to all clauses" is utilised, this will be deemed to incorporate the clauses embodied in the original policy without expressing them in full (Joyce v. Realm Marine Insurance Co., 1872), but only if such clauses are usual to such insurances. Thus while the "warehouse to ware

house" clause is normal in a cargo policy, it was held that a clause giving liberty for a vessel to navigate the Great Lakes of America was sufficiently unusual to call for disclosure (Property Insurance Co. v. National Protector Insurance Co., 1913).

Although by the Re-insurance Clause the re-insurer agrees to indemnify the original underwriter against all losses paid on the original policy (subject to the conditions of the re-insurance covering that peril by which the claim was occasioned) in the absence of any agreement to the contrary, only payments for which there was legal liability under the terms of the initial contract are recoverable from the re-insurer. Ex gratia payments made by the original underwriter are not embraced by the words "to pay as may be paid thereon," although the re-insurer in practice will often meet the initial insurer when such settlements have been effected. As payments are very frequently made to assured for which there is no enforceable liability, this point is important. The position arises out of Chippendale v. Holt, 1895, in which case it was held that a re-insurer is not bound by an improper payment made by the re-insured. It has been held by Mr. Justice Bailhache in London General Insurance Co. v. General Marine Underwriters' Association, 1921, that where a compromise settlement has been made by the original insurer on a claim for which his policy was found liable, the re-insurer is bound by the compromise and must pay his proportion of the amount agreed upon. There has been in the past some discussion as to whether the words to pay as may be paid thereon" cover the question of ex gratia payments, but it must be taken that a re-insurer is responsible only for claims enforceable at law against the original underwriter. Should a company go into liquidation either voluntarily or by order of the court, only legally enforceable claims would be admitted. The liquidator may pass no ex gratia payments whatsoever and this accounts for the number of contests in which companies in the course of winding up are frequently engaged.

Re-insurers pay their proportion of law costs incurred in contesting the liability of original underwriters if they would be involved in the ultimate settle

ment. A re-insurer is usually prepared to accept the loss figures rendered to him by the original underwriter, but should he doubt the propriety or admissibility of a claims settlement, he is entitled to demand perusal of the original documents. This course is but infrequently resorted to, but the re-insurer is entitled, for example, to a complete discovery of the ship's papers (China Traders' Insurance Co. v. Royal Exchange Assurance Corporation, 1898).

In underwriting practice there are three distinct types of re-insurance, namely:

(1) Direct re-insurance of individual risks.
(2) Cover re-insurances.

(a) Normal covers;

(b) First interest covers;
(c) Excess" covers.

(3) Treaty re-insurances.

(a) Flat Line Treaties;

(b) Excess Treaties;

(c) Participating Treaties (also called "Quota Share" or " Pooling Treaties).

Direct Re-insurance of Individual Risks.

As already noticed, several reasons may prompt an underwriter to re-insure an individual risk. First may be mentioned the speculative re-insurance of missing" or "overdue " vessels, or of those which have met with some known casualty.

There exists in the Room at Lloyd's a special market on which quotations are made to cover the risk of total loss only on all but vessels definitely lost. When a vessel is a day or two overdue a cautious underwriter might wish to cover his liability, and may do so at a commensurate premium. If time passes, and no good news is to hand, the rate at which such a re-insurance could be effected would increase, until, before the time at which the vessel is posted as "missing "she becomes uninsurable.

(A vessel is only so posted at Lloyd's at the request of an interested party, after which posting all policies effected on interests at risk in the venture become payable as total losses. The procedure is as follows: On application by an interested party to the Committee of Lloyd's for a vessel to be posted as missing, a notice is posted on the board at Lloyd's, and Lloyd's signal stations are notified that