Other classifications considered as the equivalent of 100 A1 Lloyd's are A1 of the Norwegian Record, and B.S.* of the British Corporation. Recently the highest class in the Registro Italiano has received similar approval.

Where a floating policy or open cover is effected by an underwriter, and the steamer, or steamers, remain to be notified by subsequent declaration, it is now usual to incorporate the classification clause in such contracts, as follows:

17/7/23

CLASSIFICATION

CLAUSE.

STEAMERS OR POWER VESSELS, IRON OR STEEL. Liners (ex Chartered).

Others (including Chartered) not over 20 years old

and classed: Lloyd's Register British Corporation Bureau Veritas . Norske Veritas. American Record

Registro Italiano

other Steam or Power vessels, Iron or Steel, held covered at a premium to be arranged.

Wooden, Composite and Concrete steamers held covered at a premium to be arranged, provided notice be given immediately on receipt of advices. In the case of a risk by an individual vessel the underwriter, if in doubt, would invariably turn to the appropriate register for information, and would be enabled, at a glance, to decide whether or not the vessel met with his approval.

The benefits of entry in a shipping register may be summarised as follows:

(a) Efficiency of ships safeguards life and property. (b) Frauds on underwriters are made difficult. (c) Keeps premiums on a fair basis.

(d) Guides charterer or shipper in his selection of a suitable vessel for his venture.

(e) Provides an invaluable record of the vessels of the world.

CHAPTER XV.

MUTUAL CLUBS.

ALTHOUGH marine insurance is much older than is fire insurance, the application of mutual insurance is first to be traced to the fire branch of the business. Even before the Great Fire of London there was in existence a system by which fire losses were made good by means of parish levies. The disaster of 1666 seems to have indicated a need for some further method of providing against fire losses, and as a result these risks were undertaken on a mutual basis by the various guilds. The loss of the individual therefore became the loss of the particular community of which he was a member, levies being made to make good fire losses towards which the default of the guild member had not contributed. It is to be anticipated that the members of the guilds carefully watched the application of mutuality and took steps to see that care was observed by each member in the protection of his property that the claims on the common fund should be kept within reasonable limits.

In the marine insurance world the adoption of mutual insurance was long in coming, this doubtless being attributable to the very extensive form of protection which could be obtained from marine underwriters. The Marine Insurance Act, 1906, Section 85 (q.v., ante), makes reference to mutual insurance, but gives no particulars nor makes any restrictive provisions as to its conduct. It is apparent that mutual insurance is quite legal, and that if a number of merchants or shipowners care to pool their losses, and make them good from a common fund, they are at liberty to do so. Mutual Insurance Associations must issue stamped policies in accordance with revenue requirements.

It is generally accepted among a large, if somewhat uninformed, section of the public that insurers make fabulous profits in the conduct of their business, and no doubt these people wonder why all insurance is not effected on a mutual basis. It is not the intention of the writer to elaborate the arguments against such a method, but students will be aware of the disasters. which might possibly result from a too extensive application of the principle of mutual insurance. Some shipowners do, of course, run a sinking fund for insurance purposes, instead of covering their vessels in the open market; but an adverse experience in the first few years would be likely to prejudice the financial stability of the whole concern. The Peninsular and Oriental Company may be instanced as a shipowning organisation which covers its vessels by a pooling fund, the losses of the steamers Egypt, and Wiltshire, falling on this reserve. As marine underwriters have perforce to be content with an average margin of 2 per cent. of their premium income the idea that the profits from the business are enormous is certainly something of a fable.

Another argument which can be levelled against mutual insurance is that a speculative element is introduced, as the amount of levies which may fall to be borne by a shipowner cannot be estimated in advance, and the largest calls are likely to be made when trading conditions are bad. If insurance is effected through normal channels the amount of premium payable for the cover is known at the outset. More

over, mutual insurance, implying as it does the pooling of losses, is likely to result in the careful shipowner bearing more than his due proportion of the risk, to the benefit of the less conscientious owner.

This preamble will serve to introduce the real purpose and utility of mutual insurance, which finds its outlet in the establishment of what are known as

protection and indemnity clubs." Underwriters always endeavour to improve the moral hazard of the risks they write, and, from the earliest days, steps have been taken to this end.

The memorandum in the Lloyd's S.G. Form of policy was inserted to absolve underwriters, except the vessel stranded, from losses of probable occur

rence in the case of merchandise peculiarly susceptible to damage, and in every other case from losses not reaching a stipulated percentage. The original intention of the "franchise " was that in all cases it was to be deducted from the amount claimed from underwriters in case of loss, the object being to make assured to some extent co-insurer with the underwriter. Where the underwriter nowadays is willing only to pay average in excess of the franchise, this is provided for by the insertion of the " Janson Clause."

When, as a result of the finding in the case de Vaux v. Salvador, 1836, it became necessary to draft the "Collision Clause," underwriters restricted their contribution to three-fourths of the shipowner's liability for material damage done in collision to another ship or vessel, and declined altogether to extend cover to claims on account of loss of life or personal injury, or for damage done to immobile objects, e.g., dock walls, jetties, quays, etc. Nor does the clause in its ordinary form accept any responsibility in respect of the cargo engagements of the insured vessel. 66 Delay being expressly excluded from the policy, "own vessel's demurrage is also not covered. In addition there are many other losses which fall to be borne by a shipowner which do not fall within the scope of a normal marine insurance policy, e.g., liability for faulty stowage of cargo, non-delivery of cargo, employer's liability, etc.

In the middle of the nineteenth century the onus of these losses commenced to press hardly on shipowners, and mutual clubs were started to indemnify shipowners from loss from such causes, in fact to provide protection against all risks for which underwriters would not accept liability. As values of vessels increased and there was a very rapid rate of increase after the introduction of steam power-owners also could not afford to run the risk of loss less than that necessary to reach a 3 per cent. franchise on high valuations. Some attempt to meet this grievance has been made by multiple valuations, by which a separate amount is entered into the policy for hull, machinery, fittings, cabin furniture, etc., each valuation to rank separately for franchise purposes, or "the whole be the basis at the option of the owner.

This does not go far enough, so we find so-called "small damage risks included in the scope of the "Protection and Indemnity" Clubs.

In 1856 the North of England Iron and Steamship Insurance Association was formed. This organisation invited shipowners to enter their vessels for a line of from £2,000 to £5,000 on each vessel, and not for their full value. Losses were to be made good by mutuality, no limit being set upon the amount of the levies. Levies were assessed at intervals of two months. (By the Companies Act, 1862, mutual insurance associations were permitted to limit their liability.) It cannot be said that the scheme was a success in practice, as the values declared by the owners were often on a fictitious basis.

The whole method of organisation and control was therefore reorganised.

Members entering an association, which usually has no share capital, and is limited by guarantee, enter into the pool on the basis of gross tonnage, but a shipowner is not bound to enter all his vessels. Calls are made periodically to cover losses and management expenses, and generally do not amount to a great sum per ton in any one year. The scope of the cover is laid down in the Articles of Association, but in general all losses not covered by underwriters and not due to the actual fault, privity or wilful misconduct of the shipowner, are admitted.

Shipowners may enter their vessels for all, or any, of the classes of risks covered by the Association, and are subject to the rates of call for the various classes entered.

As an example of the mutual clubs operating in this country may be mentioned the North of England Protection and Indemnity Association, which

covers:

Class 1.-Protection, i.e., against claims for one

fourth of damage done to other ships or vessels, damage to structures, loss of life, personal injury, etc., inclusive of all liability under the Workmen's Compensation Acts.

Class 2.-Indemnity, i.e., Shipowners' liabilities arising in connection with cargo.