transactions. Another means is to take the trouble of sifting out any suspicious case, and to get every document that bears upon it and examine it by the light of collateral evidence. Another remedy is to cease to insure to such places and such persons as are proved by the underwriter's experience to bring constant and numerous claims. It has even been tried to insert a premium on the sound delivery of goods by returning part of the premium charged in case there is no claim for Average. And, lastly, there is the grand means of individuals enforcing by their own practice and influence a general strictness and exactitude in all matters of this nature, so as to make every certificate and every claim a subject of conscience. And if it be still found that premiums are inadequate on account of the excess in number and amount of claims, there is no alternative except to increase the premium, or to underwrite the risk "free of Particular Average."

362

PART THE SIXTH.

OF MUTUAL ASSURANCE ASSOCIATIONS OR CLUBS.

The principle of reciprocity, which has become so very general in Life Assurance, has not yet been adopted to at all the same extent in Marine Insurance. It appears, however, to be gaining ground; and during the last few years several clubs or associations for mutual insurance have been established in London.* But it is among the smaller ports along the coasts of England that the system of mutuality prevails most and is most successfully acted upon. And it will be shown that this system essentially belongs to a small community, and to a limited number of vessels; for when reciprocal action is intended, a personal knowledge among the members of the association of each other and of the shipping each possesses is very material to its prosperity.

The principle is a very simple one in itself. It is intended to effect among shipowners a saving of that surplus of premium over the absolute risk which is

One of the largest of the London offices has the name of the "Indemnity Mutual Marine Insurance Company." It is, however, a proprietary office, and the term Mutual is, so far, a misnomer.

the professional underwriter's profit. And it is not necessary to proceed upon any calculated tables of what is the dry premium, (as it is called in Life Assurance)—for even that would nearly always be, practically, either in excess or defect of the result of any one year; but, by feeling their way along, as it were, that is, by making call after call for the actual losses that have occurred, each year is an experiment, and whether it be a good year or a bad one only the exact equivalent to the risk run is paid by the assured.

Though this is the outline of the system, some adjustment is required to make it work in practice. There must be a parity among the members. As to amount, that is easily settled:-the amount for which the club is liable in respect of the ship of any particular member is the sum on which that member is to contribute towards the losses of others. But amount alone will not produce parity. If ships of high and low class are associated together without regard to quality, the owners of the high-class vessels will soon find that theirs is a union in which the advantages are possessed by the owners of the opposite class of ships. The result will be that the superior vessel will be always the loser by its association with inferior shipping. The former class will from its superiority bring in, comparatively, a small quantum of risk, and will for the same reason pay a high proportion of the losses.

Some arrangement must therefore be made to prevent this double disadvantage. In some associations, called A 1 Clubs, only vessels of that registered class

are admitted, and they are thus pretty nearly on a footing. In other clubs an imaginary value for contribution is placed on the ships, apart from the value claimable in case of the ship's loss. In a third set of clubs the disproportion is rectified by the introduction of premiums, of which there are three classes suitable to three classes of vessels. And a fourth plan is, by a return of part or the whole of the third deducted for melioration. Thus: all ships to be valued for the purpose of equalisation at one rate, say 67. per ton: but owners are allowed to value their ships separately at their true value, or at such value as they please. And to encourage ships of high value being introduced a formula is made for settling Averages (not losses), by which the difference for melioration shall be inversely as the difference in value, within the limits of 97. and 67. per ton. It is very difficult to make the expression of this arrangement understood without an example. Here is one.—

An A 1 ship of 500 tons, put into a club at a value of 91. per ton; of which value the club takes as a maximum 1,500l.

Amount of Average for repairs to the vessel £300
Less for melioration, one-third

100

£200

If the whole value, 4,500l., pay 2007., the sum insured will pay in proportion 667. 13s. 4d.

To rectify this for high class. As 67. per ton is to 661. 13s. 4d., 91. per ton will be to 100l. Or as it would stand;

500 tons at 61., (3,000l.): 667. 13s. 4d.:: 500 tons at 91., (4,500Z.) = 100%.

Thus, in this instance, the whole of the melioration deducted is given back as an encouragement for high values,-high values indicating ships of superior quality or class. And the same principle is carried through all intermediate differences of value, 6l. per ton giving no augmentation at all on the actual claim, and 91. per ton giving the maximum. Ships of still higher value only to be taken at 97. per ton for the purposes of settlement of Particular Averages.

I fear this will appear a rather complicated arrangement for producing a desirable end. I think a very much simpler one and one more efficacious would be the following.

The object is to compose the club as much as possible of valuable high-classed ships. The vessels of inferior class, having correspondingly low values, bring in a high proportion of risk and therefore loss to the association; and, owing to low value, bear only a minimum proportion of the general losses in relief. The following illustration will serve.

Suppose a club composed of 200 vessels of high

Imagine that the effect of fine build, recent con

struction, and ample supply of spare stores were, that