William Loring Andrews.

The Continental Insurance Company of New York, 1853-1905, a historical sketch online

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Online LibraryWilliam Loring AndrewsThe Continental Insurance Company of New York, 1853-1905, a historical sketch → online text (page 1 of 3)
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Copyright, 1906, by




44-48 Cedar Street, New York.


Court and Montague Streets, Brooklyn, New York.


President, 1853-1857.


President, 1857-1885.


President, 1885-1889.


President, 1889-1903.


President, 1903-


100 Broadway, New York.


158 Montague Street, Brooklyn, New York,








THIS favored land of ours is rich beyond
compare in all but one particular. It is a
new country that we inhabit, and an-
tiquity not being a purchasable article, we must
perforce remain to the end of the chapter one of
the youthful members of the family of nations. So
few comparatively are the years that lie behind us,
so brief our history, that we refer with a feeling of
ancestral pride to organizations and institutions
founded prior to our Revolutionary War, dub
them " ancient and honorable/' and treat them
with the respect and veneration we render to grey

The business of fire insurance falls distinctly
within this category, for a fire insurance company
was formed in Philadelphia as early as 1752, Ben-
jamin Franklin the organizer also, in 1738 of
the first fire engine company being one of its ac-
tive promoters. This parent company was followed



by the "Mutual" of New York in 1787, "The
Insurance Company of North America," of Phila-
delphia, which is still in existence, founded in
1792, the "Equitable" of Baltimore in 1794, and
the "Massachusetts" of Boston in 1795.

Policies of insurance were obtainable in England
t Before fti<* time, but it would appear that previous
..-to the formation of domestic companies, fire loss
indemmty^w-ith the merchants of New York, was,
to some extent, a matter of brotherly kindness and
obedience to the scriptural injunction to bear one
another's burdens and so fulfill the law of love; the
neighbors of the sufferer by fire contributing, to
make good his loss, so far as they felt able and
inclined actuated partly, no doubt, by a realiza-
tion of the necessity of standing shoulder to shoul-
der for mutual protection against a common danger.
The "Mutual Assurance Company of the City of
New York" was for a number of years, the only
insurance company in the city, and it probably
sufficed for the needs of the little town of New
York of its day, which contained only about 3,400
houses and had a population of but 24,000. The
company's form of policy was drawn up by Alex-
ander Hamilton, and it transacted both a fire and a
marine insurance business, as all of these companies
first in the field appear to have done.

The "great " fire of the 2 1 st of September, 1 776,
the year that the British troops took possession of
New York, consumed 493 buildings before its
course was checked. Again in the summer of
1778 the fire fiend visited the city and left fifty


OF NEW YORK, 1853 TO 1905

houses and stores in ruins, but the most disastrous
and alarming conflagration New York had yet
experienced broke out in the evening of December
1 6, 1835. Six hundred and seventy-four struc-
tures and property valued at $15,000,000 were
destroyed in this catastrophe, and the principal
part of the First Ward, was erased from the map
of the city. The night was bitter cold and a high
wind fanned the fire. Its march was stayed only
by the blowing up of buildings that lay in its path,
and by lack of fuel for the flames to feed upon when
they reached South Street and the shores of the
East River. A writer of the time states that the
passengers in the steamboat coming down the
Hudson saw the flames from the Highlands, forty-
five miles distant, and such was the violence of the
gale during the prevalence of the fire, that burning
embers were carried across the East River to
Brooklyn, and set fire to the roof of a house there,
which was, however, speedily extinguished.

Seventeen years subsequent to the great fire
of 1835, and while the memory of it and of the
one that occurred ten years later (July 19, 1845)
must have been still vivid in the minds of the
citizens of New York, a company of men was found
willing to embark upon the stormy sea of fire un-
derwriting and engage in what had proved itself
to be a hazardous business in the extreme, and
these venturesome men christened their craft the

The precarious nature of the fire insurance busi-
ness the "fearful mortality of fire insurance cor-


porations" is fully demonstrated by the array of
figures for the twenty-six years from 1877 to 1902
inclusive, presented by "The Chronicle/' an in-
surance journal of New York City. These tables
show an estimated aggregate property loss in the
United States during this period of $3,092,630,-
171, and an insurance loss of $1,828,539,628, in
consequence of which one hundred and twenty-
three of the one hundred and sixty-nine com-
panies in operation January i, 1871, and organ-
ized after that date, were driven out of existence.
It required a staunch ship and able seamanship
to navigate such troubled waters as these.

By way of addenda to the bewildering mass of
numerals in the foregoing statement, it may be
noted that the fire insurance written in 1904, by
companies reporting to the New York Insurance
Department amounted to between twenty-four
and twenty-five billions of dollars, of which the
Continental's share approximated seven hundred
and seventy-four million dollars.

At the close of the year 1905, the Continental
had insurance in force amounting to one billion,
one hundred and eight million dollars a vast sum,
it would seem, to be protected by one company;
but it is really an element of safety, for scattered
as the liability is over the entire United States,
and with a comparatively small amount at risk in
each city or town, there is no danger of the des-
truction in any one fire or conflagration of more
than an inconsiderable proportion of the property
insured, while on the other hand the revenue


OF NEW YORK, 1853 TO 1905

earned by the Company from this great business
adds strength to each individual policy. It has
been said that the science of fire underwriting is
found in the "aggregation of assets and the scat-
tering of liability/'

THE story of the organization of The Con-
tinental Fire Insurance Company, and of
the fortunes good and ill that befell it
during the first twenty-three years of its existence,
is concisely narrated in a pamphlet published by
the Company in 1876, and from it many of the
facts, figures and statements appertaining to that
period in its history have been taken.

Prior to the great fire of 1835 there were several
companies with a capital of half a million dollars,
and one with a million, engaged in the business of
fire insurance in the city of New York. Insurance
stocks had become a favorite investment, not only
with capitalists, executors, and trustees of estates,
but also with people of moderate means. To a
greater extent probably was this the case in our
sister town of Boston than here with us, for when
the conflagration of November 9, 1872, visited
that city, the number of families impoverished
through the total extinguishment of their invest-
ments in the stocks of fire insurance companies,
attracted general attention and aroused the sym-
pathy of the public.

The dividends paid by fire insurance companies,
which seldom reached ten per cent, could not have
been considered highly remunerative at a period


when the legal rate of interest was seven per cent,
and this return was also expected, as a matter of
course, from real estate investments, and even from
such gilt-edge securities as State and City stocks
and bonds. The exemption of insurance stocks
from taxation in the hands of the holder (for the
companies assumed and paid all taxes) was doubt-
less an attractive feature, and no one seemed to
dream of the possibility that the principal itself
of the investment might entirely shrink away in a
great fire such as has repeatedly since those days
swept over a city, and caused the bankruptcy of
numerous insurance companies in a single night.
The fire of 1835 bankrupted all but seven of the
New York companies, including the one with a
million dollars of capital, and all of those with half
a million, while the greater number of the seven
companies which escaped insolvency lost a large
proportion of their assets. From the ruins of that
fire no million-dollar company arose, and but two
or three of a half-million each. A burnt child
dreads the fire, and fire insurance stocks were no
longer regarded as proper security for the invest-
ment of trust funds; nor were stockholders any
longer contented with moderate rates of dividend
from a business shown to be so precarious. The
projection and construction of the magnificent
Croton water-works, and the introduction toward
the close of 1842 of an abundant supply of water,
restored much of the confidence in insurance stocks.
This trust was destined soon to experience another
suspension in the rude shock which it received by


OF NEW YORK, 1853 TO 1905

New York's second great fire, that of July 19,
1845, which ruined several of her insurance com-
panies, and impaired the capitals of nearly all the
others, including among them those with a capital
of $500,000 each.

In 1848 there were in the City of New York but
seventeen fire insurance companies, and their
united capitals barely reached four million dollars.
The citizens of the State began to feel severely the
absence of adequate insurance protection, and this
condition of affairs suggested need of legislative
encouragement in order to prevent the practical
extinction of that indispensable protection to the
material interests of the State and especially so for
New York City, where the severe lessons of peril
and of loss had been enforced. The first general
insurance law of the State of New York was passed
in 1 849, and soon led to the organization of several
companies having $200,000 each (the minimum
capital allowed for companies doing business in
New York City,) and a multitude of those town
and county mutuals, which have everywhere, and
in almost all cases, proved to be a snare and a delu-
sion to agricultural populations; but which hap-
pily endure only for a short season. Until the
year 1852 the City of New York had but two com-
panies with capitals in excess of a quarter of a
million dollars, and the larger of these reached
$300,000. A number of New York's most prom-
inent merchants, recognizing the claims of its com-
mercial interests, and deriving their chief incentive
from its past misfortunes, determined that its



citizens should have a first-class insurance com-
pany, with a capital of not less than half a million
dollars, to be guided in its operations by the best
underwriting experience obtainable. Out of this
public spirit arose the insurance incorporation
which came to be known as The Continental In-
surance Company of the City of New York.

The first Board of Directors was composed of the
following gentlemen :

David Lane
Henry C. Bowen
William W. Stone
Watts Sherman
Jonathan Hunt
Thomas Tileston

Dan H. Arnold
Charles F. Dambmann
Samuel D. Babcock
Charles H. Booth
E. H. T. Gibson
Edward Lambert
Daniel Burgess
Aurelius B. Hull
Hiram Barney
Wilson G. Hunt
William A. Hall
Horace B. Claflin
Peleg Hall
George W. Lane
James A. Edgar
Wellington Clapp
Lycurgus Edgerton
A. Studwell
Charles M. Connolly
Charles E. Beebe
Abiel A. Low
George S. Stephenson
Lowell Hollbrook

Thomas Smull
Thomas Denny
Jonathan H. Ransom
James Freeland
Joseph Battell
John Paine
Joseph W. Patterson
Charles Lamson
John Caswell
Simeon B. Chittenden
C. A. Avery
William M. Vail
William M. Richards
George Griswold
Sheppard Gandy
Robert H. McCurdy
William V. Brady



PRESIDENT, '853-1857

OF NEW YORK, 1853 TO 1905

In due course committees were appointed to se-
lect for the company the required managerial tal-
ent, and an office suitable for its accommodation.

The officer first chosen was its secretary,
George T. Hope, who, although still a young man,
had already had large experience in underwriting,
having been, for more than half his life, an officer
of The Jefferson Fire Insurance Company. The
Hon. William V. Brady, ex-mayor of the City of
New York, was elected president, which position
he held until May, 1857, when he was succeeded by
the secretary, Mr. Hope.

Books for subscription to the stock were pub-
licly opened, as required by law, on the 2jth of
December, 1852, and were closed at the end of
two hours, when it was found that an amount
largely in excess of that fixed upon for the capital
($500,000) had been subscribed. The subscrip-
tions were all paid in on the 3rd of January, 1853,
and on the yth of that month all legal prelimi-
naries being completed the Continental's first
policy was issued.

The primary purpose of the stockholders of the
Continental was to provide a first-class company
for the City of New York, but it was not their in-
tention to preclude the extension of its business
in due process of time to other fields by means of
agencies. The company soon gained the reputa-
tion of being ably managed, and applications for
agencies were pressed upon it. Its first agency
was established during the year 1853, at Cleve-
land, Ohio.



THE steady forward march of the Continen-
tal, in the systematic expansion of its
business, the increase of its assets and the
extension of its power and influence as an under-
writing institution are shown in the successive
annual statements made by the company to the
Insurance Department of the State from the com-
mencement of its operations until the year 1871.
On the 8th, 9th and i oth of October of that year,
occurred in Chicago that unprecedented conflagra-
tion which burned over five square miles of the city,
and swept away insurance capital and every form
of combustible property within the district where
it raged. The Continental had been transacting
business in Chicago for seventeen years, was thor-
oughly well known and appreciated by the property
owners of that city, and its business there, selected
with assiduous care, was large and profitable. It
was now to be called upon to pay fire losses
amounting to nearly one and three-quarter mil-
lions of dollars. The manner in which the com-
pany met this great disaster is indicative of the
decision and energy of its Board of Directors, and
of the views which they held of the commercial
sphere and functions of an insurance company.
The Chicago fire started on Sunday evening, Octo-
ber 8th. That it was a great conflagration was
apparent before Monday closed, but its full extent
was not known even on the Wednesday following.
In order to obtain definite and reliable information
as to the extent of the company's loss, a special
agent had been despatched to Chicago. He tele-


OF NEW YORK, 1853 TO ! 95

graphed that $1,200,000 would more than pay it.
The officers in presenting the despatch to their
Directors asked them to consider the loss to be not
less than $1,500,000. The result proved that the
local and special agents, though on the ground (as
was the common experience of companies involved
in that calamity) greatly underestimated the
amount of loss. The regular monthly meeting of
the Board of Directors occurred on Thursday
morning. Information to the latest date was laid
before them. 1 1 was obvious to them that the cap-
ital of their Company, which five days before com-
manded a price of $300 per share in the New York
market, was still sound at par, but that the security
of their policyholders was materially diminished.
The Directors evidently having previously deter-
mined, each for himself, the action properly to
be taken, met, and after discussing the situation
for a quarter of an hour, unanimously resolved to
double the capital of their Company, making it
one million dollars, and to pay the additional five
hundred thousand dollars in cash and at once.
The courage of that action can be appreciated only
by those who were heavily involved in that loss.
Not knowing what effect the distrust awakened
by the failure of a large number of companies
might have upon the stockholders of the Conti-
nental, but firmly resolved to secure the addi-
tional half million of capital, the individual mem-
bers of the Board of Directors present, subscribed
the entire amount before they left the Directors'
room. The confidence of the Directors in their



officers, shown by this prompt and resolute
action, was endorsed by the stockholders and the
public, who immediately subscribed to the new
stock $1,090,400, where only $500,000 could be

At the meeting of the Continental Directors,
January, 1872, the following resolution was
unanimously adopted:

"Resolved : That the thanks of this Board are
due and are hereby tendered to the officers of The
Continental Insurance Company for the courage,
skill, and good management with which they
have met a great epoch in its affairs, in success-
fully providing for losses by a single fire amount-
ing to three times its original capital, and in
simultaneously placing it in a condition of strength
that entitles it to the confidence of a constituency
already twice as large as it was before the burning
of Chicago/'

The calamity of Boston, in November of the
following year, just a year and a month and a day
after the fire at Chicago, inflicted a loss of over
seven hundred thousand dollars on the Conti-
nental. The business of the preceding ten months
had been strangely fruitful of losses, and the
company had had neither time nor opportunity
to accumulate any considerable amount of sur-
plus. In view of this new and severe demand
upon the Company, there was left for the consid-
eration of the Directors the option of reducing
the capital to five hundred thousand dollars, or of
submitting to an assessment of four hundred



PRESIDENT, 1 8 ^ 7- I 88^

OF NEW YORK, 1853 TO 1905

thousand dollars. The feeling of distrust of in-
surance stocks, which had again begun to be
freely expressed in the community, was recog-
nized, but after a brief consultation the Directors
again met the requirements of the hour by accept-
ing the burden of assessment, and, before leaving
their seats, confirmed their resolution by sub-
scribing for the entire sum required. Again, also,
the stockholders and the New York capitalists
sustained the action of the Continental Directors
by a subscription of over one million, where only
four hundred thousand dollars could be received.

These two great conflagrations, bringing the
bankruptcy of one hundred companies, and the
consequent enormous wastage of resources in
their train, could not fail to suggest to sound
underwriters that the prevailing system of organi-
zation of insurance companies lacked important
elements of safety, and the effect of the Continen-
tal's costly but triumphant experience, upon the
views of its managers, led them to induce the
Directors and stockholders of the Company to
submit to the provisions of the New York Surplus
Law (otherwise known as the Safety Fund Law),
which became operative upon its passage in
April, 1874.

The Safety Fund Law restricts the dividends
of a fire insurance company to seven per cent upon
its capital and accumulated funds, until these
funds equal or exceed the capital stock, when all
dividend restrictions are removed. Under this
law, the special reserve fund is held for the pro-



tection of policyholders not involved in a con-
flagration which, without this provision this
sheet anchor to windward would exhaust the
entire loss-paying resources of the Company and
drive it upon the shoals of bankruptcy. This
fund, deposited and safeguarded at Albany, im-
mediately supplies a capital that enables the
Company to avoid a receivership, with its ruinous
charges and commissions, and its vexatious hin-
drances, and to continue business without an
hour's interruption or delay.

At the time the Continental submitted to the
provisions of this law, it was a matter of impor-
tance, for the Company's assets amounted to but
$2,606,235.00. At present, with the large surplus
that it has accumulated, the law is no longer
necessary for the protection of its policyholders,
but doubly > safeguards their interests.

One other characteristic of The Continental
Insurance Company deserves notice. In 1869 the
officers induced the Board of Directors to adopt
a system which amounts to a guarantee that no
misappropriation of any of the assets of the Com-
pany can take place. The security afforded by
this plan so impressed the Hon. Julius L. Clarke,
Insurance Commissioner of Massachusetts, who
incidentally became acquainted with it, as to lead
him to make an extended reference to it in his
annual report of January i, 1872, of which the
following is an extract:

"Under its operation, a special committee on
assets, consisting of three members of the Board


OF NEW YORK, 1853 TO ] 95

of Directors, are required to make, at irregular
intervals, to be determined by themselves, but at
least as often as once in each month, a critical
examination of any part, or of the whole, as they
may elect, of the assets of the Company; the result
of such examinations to be reported at each
regular meeting of the Board. It is further pro-
vided that, upon its appointment, the committee
shall divide itself into three classes, so that its
members shall act for one, two and three months
respectively; the place of the retiring member to
be filled by another appointment for three months
at each regular meeting of the Board/'

"This is the plan adopted by a well-managed
company; the certificates of monthly examina-
tions embodied in the records of its asset com-
mittee for years past showing that this duty has
been faithfully fulfilled. If other companies have
adopted similar usage, all the better. Be that as
it may, every intelligent financier will discover
in the scheme here set forth a development of
method and accountability which, wherever
adopted, should scarcely fail to secure absolute
safety and confidence/'

ON July 27, 1885, Mr. George T. Hope died
at his residence at Bay Ridge, Long
Island, in the 67 th year of his age. In
the twenty-eight years that he filled the office
of president of the Company its assets increased
from less than a million of dollars to over five
millions, and its surplus rose from a scant one


hundred thousand dollars to a million and a half,
but of this increase as has been shown -
$900,000 had been contributed by the stock-
holders to the coffers of the Company, $500,000
as new capital and $400,000 in payment of an
assessment of forty per cent rendered necessary
by the losses sustained in the Chicago and Boston

Mr. Hope's administration extended over other
trying periods in the history of the Company,
besides those incident to these two great fires
which shook the very foundations of the fire in-
surance business in the United States. It covered
the four years of the Civil War, those anxious days
and nights for all charged with the care and con-
duct of important business enterprises; and the
Continental in addition had peculiar troubles of
its own in the Inland Marine Department of its
business, vexatious legal complications, which

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Online LibraryWilliam Loring AndrewsThe Continental Insurance Company of New York, 1853-1905, a historical sketch → online text (page 1 of 3)