XIII. Parliamentary Inquiry into Marine Insurance
THE rapid growth of Lloyd’s during the war, and the fortunes accumulated by many of its members, such as Sir Francis Baring, Mr. J. J. Angerstein, Mr. Thomson Bonar, and others, had the natural consequence of engendering a desire for competition, and there were many attempts, towards the end of the eighteenth and in the early part of the nineteenth century, to establish a powerful rival of Lloyd’s in the form of a new marine insurance company on a large scale. To do this, it was required, in the first instance, to upset the two charters granted under the Act of 6 George I. cap. 18, sanctioned June 24, 1720, which bestowed upon the London Assurance Corporation and the Royal Exchange Assurance Corporation a monopoly to carry on the business of marine insurance as joint-stock companies, or, in other words, in a different way as practised at Lloyd’s. Among the earliest promoters of a new great marine insurance company were the directors of the Globe Fire and Life Insurance Company, established in 1797, who were anxious to add the marine department to the other two branches. It was thought at first that there would be no great difficulties in getting a charter for marine insurance, seeing that the two corporations of 1720 availed themselves to a very limited extent of their joint monopoly, preferring the safer business of fire insurance to that of underwriting, and shunning rather than seeking transactions out of the ordinary routine, which, if capable of bringing large profits, involved corresponding risks. Besides, the two charters of 1720 expressly reserved the right of the government, under the sanction of Parliament, to terminate all the special privileges bestowed upon the London Assurance Corporation and Royal Exchange Assurance Corporation, either by merely giving them three months’ notice of such intention, and repaying the “consideration money” obtained from the companies, or without any notice whatever, or repayment of moneys, if it was found that the granted monopolies were “hurtful or inconvenient to the public.” Relying upon the latter phrase, sweeping enough to justify immediate suppression of the privileges granted in 1720, which, if not “inconvenient” to the public at large, were decidedly “inconvenient” to a section of it, that represented in the Globe, the directors of the latter company applied in 1798 to Parliament, asking for a repeal of the Act 6 George I. cap. 18,in as far as it restricted other-joint stock undertakings from parrying on the business of marine insurance.
The petition of the directors of the Globe, instead of being favourably entertained, as expected, met with the most intense opposition, coming, however, less from the London Assurance and Royal Exchange Corporations, immediately concerned in the matter, than from Lloyd’s. The two old chartered companies of 1720, looked upon at the outset, if not as direct foes, yet as very unpleasant rivals, by the members of Lloyd’s, had long lost this character, and become attached friends and auxiliaries of the private underwriters and brokers. It was evident, indeed, that it was under the protection of the charters granted under the Act 6 George I. cap. 18, that Lloyd’s had risen to greatness. Marine insurance being forbidden to all joint-stock companies except the two chartered corporations, and these two engaging at the same time, with a rather limited capital, in fire and life insurance, to the comparative neglect of the third branch, the business of marine insurance, while increasing to formerly unknown dimensions, was absolutely driven into Lloyd’s. This was so thoroughly felt in the “coffee-house” that, when the Globe application came before Parliament, it was at once met with the most energetic opposition. In the House of Commons, Lloyd’s was represented by about half-a-dozen members, who exerted their influence so well that the petition of the Globe did not even get a hearing. Nothing daunted, the directors of the latter company returned to their charge in 1806, this time under far more favourable auspices. They found, through personal connections, strong allies in Lord Granville and Mr. Fox, who had got into power in January of the same year, and who promised to give the application government support if the Globe would undertake to pay the “consideration money,” upon the return of which the London Assurance and Royal Exchange Corporations were liable to have their privileges withdrawn. To this the directors readily consented, but to no result. A bill granting the application of the Globe went into committee in the session of 1806, but when closely examined it was found to be badly drawn, and all but useless for the intended object. Recrimination followed between the Globe directors and their friends in the government, who promised to mend matters in the next session. But in March, 1807, Lord Granville ceded his place of prime minister to the Duke of Portland, and the government promise came to nothing. There did not follow any more applications to Parliament from the Globe company, which vanished from the field of marine insurance—as it has now vanished altogether from the insurance world.
But the Globe was only defeated to give way to other far more formidable competitors of Lloyd’s. The feeling having grown very strong in the city of London that enormous profits might be realized by a great joint-stock company carrying on the business of marine insurance, there formed itself a powerful organization of wealthy merchants, determined to get a charter of incorporation for such a company, towards the end of the year 1809. Among the promoters of the new undertaking were so many eminent men, that the belief arose in the city that their power would be irresistible, which induced a number of the smaller underwriters and brokers frequenting Lloyd’s to join them, they looking upon themselves as passengers in a vessel about to be wrecked by collision, and deeming it best for their safety to jump on board the ship that was looming in the distance, bearing upon their doomed craft. However, the great majority of the members of Lloyd’s by no means shared this feeling, and, a general meeting having been called together to discuss the subject, it was resolved to offer the utmost resistance to the establishment of the designed new marine insurance company. The meeting was presided over by Mr. Jasper Vaux, elected member of the committee for managing the affairs of Lloyd’s, September, 1796, in place of Mr. J. J. Angerstein, who retired at this time, without, however, withdrawing his interest for promoting the best interests of the association he helped to organize, and was held on the 29th January, 1810. It stands thus recorded in the minute books of Lloyd’s:—
“At a general meeting of the Subscribers to this House, convened for the purpose- of taking into consideration such measures as should appear most expedient to prevent the success of an intended application to Parliament for establishing another Chartered Company with powers to effect marine insurances:
“Resolved unanimously, That it appears to this Meeting that it will be highly detrimental to the interests of the subscribers of this House in general, and ruinous to numerous individuals who have made insurance their sole business, if any new Company should be legally authorized, by Charter or otherwise, to effect Marine Insurances.
“Resolved unanimously, That it appears to this Meeting that the formation of any new Company would be an infringement of their general rights, which have been already trenched upon by the Charters granted to the Royal Exchange and London Assurance Companies, and that every restraint on commerce is a bar to its prosperity.
“Resolved, That it appears to this meeting that so long as the Act of Parliament which authorized His late Majesty, King George the First, to grant these Charters, stands unrepealed, so long is it unpracticable for the legislature, without a violation of justice, to sanction the formation of any new company for similar purposes, because, on the one hand, that Act declares that no other Company shall effect marine insurances, and, on the other, it prohibits any two or more individuals from underwriting on joint account, notwithstanding they may be partners for every other purpose.
“Resolved unanimously, That a special Committee be appointed for the purpose of opposing every application to Parliament, or to the Lords of the Privy Council, for an Act, or Charter, to enable any additional Company, or Corporation, to effect Marine Insurances, and that such Committee have full powers to take all such measures as they shall deem most expedient for that purpose, and that they be reimbursed all expenses they may incur out of the funds of this House.
“Resolved unanimously, That the Committee consist of the following Gentlemen, viz.:—
John Julius Angerstein, Esq.
Thomas Parry, Esq.
Horatio Clagget, Esq.
George Munro, Esq.
Thomas Newnham, Esq.
Joshua Reeve, Esq.
Samuel Shaw, Esq.
J. F. Throckmorton, Esq. Thomas Reid, Esq.
Robert Dewar, Esq.
James Innes, Esq.
Ken. Mackenzie, Esq.
Elias Heintz, Esq.
T. Halliday, Esq.”
The gentlemen thus appointed to form a committee set very vigorously to work to execute their task, in which they were not a little assisted by several members of Lloyd’s who had seats in the House of Commons, chief among them Mr. Joseph Marryat, M.P. for Sandwich. Mr. Marryat had acquired a very influential position in the House, both on account of his personal merits and as an eloquent speaker. He came from an old Protestant French family long settled in Kent, his immediate ancestor being “Le Sieur Thomas Marriette,” a distinguished officer in the Huguenot army, who escaped the St. Bartholomew massacre in 1572, happily reaching England, though with loss of all his fortune. The father of Mr. Joseph Marryat, Thomas Marryat, M.D., gained literary renown as the author of “Therapeutics, or the Art of Healing;” and greater literary renown was in store for his son, Captain Frederick Manyat, the great “novelist of the sea.” At the time Mr. Joseph Marryat, subsequently chairman of the committee, stood forth as champion of Lloyd’s in the House of Commons, he filled the important position of Colonial Agent for Granada, and as an underwriter had gained a high character in the commercial world. The promoters of the new great marine insurance company having brought their case before the House of Commons in the form of a substantial motion, made by Mr. William Manning, M.P. for the city of London—father of Cardinal Manning—to the effect “that a select committee be appointed to consider the Act of the 6th of George the First, concerning marine insurances, together with our present means of effecting marine insurances,” Mr. Joseph Marryat opposed the motion in a highly interesting speech, delivered February 20th, 1810. The speech, remarkably clear and incisive throughout, resumed itself into the two arguments that, first, there was no need for any new marine insurance company, the underwriters of Lloyd’s, together with the two corporations chartered in 1720, being able to do not only all the existing business, but much more; and, secondly, that it was in the nature of marine insurance to adapt itself more to the mode in which it was carried on at Lloyd’s, safely and successfully, than to any other possible to be practised by a joint-stock undertaking. In proof of his arguments, the member for Sandwich commenced by giving a short and lucid sketch of the position of Lloyd’s.
“In order to put the House in possession of the real merits of the case,” Mr. Marryat began, “it will be necessary to explain the mode in which marine insurances are at present effected in this metropolis. Exclusive of the two chartered companies, there are about one thousand five hundred subscribers to Lloyd’s, the greater number of whom daily attend there for the purpose of transacting insurance business. The merchant, when he receives an order to effect insurances from his correspondents abroad, or has occasion to cover property shipped by himself at home, applies to an insurance broker, who transacts the business either with the public companies, or with individual underwriters, according as he finds it most to the advantage of his employer. The House will see the extent to which competition is carried by this mode of effecting insurances. The merchant is aware that his credit with his foreign correspondents depends upon his executing their orders on the best terms possible. The broker is equally aware that his credit with his employer, the merchant, depends upon the same circumstance. The underwriter is also aware that, unless he writes at the very lowest current premium, the brokers, who are in the habit of showing him their policies, will transfer their accounts to other underwriters, and from this consideration he frequently accepts a premium which, in his best judgment, he considers inadequate to the risk, rather than lose his connections. Thus competition is carried to the highest possible pitch; and thus has the reputation of this country for effecting marine insurances on the most reasonable terms been so universally established, that orders from every part of the globe are sent here, the property annually insured in this country amounting to nearly two hundred millions, as is proved by the duty paid for stamps upon policies.”
Combating next the assertion made before the House, that greater competition would be created by the establishment of the proposed new marine insurance company, Mr. Marryat, showed that there existed a much greater tendency at Lloyd’s to take all risks, than there could be in any companies. “The two public offices already in existence,” he said, “so far from coming into competition with Lloyd’s in any way beneficial to the general interests of the public, confine themselves to what are called ‘regular risks’—in effecting which, to any possible extent, there is no difficulty whatever. But in what are called ‘cross risks’—in those new and perilous modes of carrying on commerce, to which the state of Europe has lately obliged us to resort—the public offices come into no competition with Lloyd’s, for they refuse to write them at any premium. During the whole of the last year, they refused to insure vessels trading to or from the Baltic, unless warranted free from capture and seizure in the ports of the enemy—the great risk against which the parties interested wished to be covered. Therefore, this branch of commerce, which extended the export of our manufactures and produce to an unprecedented amount, and secured us an abundant supply of naval stores, so indispensably necessary to the support of our maritime greatness, would never have been carried on— for, unless it could have been insured, it could not have been carried on—but for the spirit and enterprise of the underwriters at Lloyd’s. Every man there ventured a certain sum upon these risks, such as he could afford to pay in case of loss; and thus the whole property was covered, and these invaluable national benefits were obtained.”