The success of the Lloyd’s of London type of insuring arrange­ment has led to the formation of associations of private underwriters in the United States, some calling themselves “Lloyds Association.” American Lloyds associations have not, in general, maintained the same high degree of integrity as Lloyd’s of London.

One of the principal flaws has been that many of the underwriters in the association place a limit on their liability; that is, they do not put their full resources back of their underwriting. In case losses exceed their underwriting resources, there is no legal recourse against their other resources.

American Lloyds are not plentiful in number. Because of the doubtful value of the American Lloyds type of organization, the New York Insurance Code now prohibits the organization of any new associations of this type.

Capital Stock Companies

The poor finances of England and the willingness of King George I to cooperate account for the introduction of corporate underwriting into Great Britain. For years the individual under­writers had fought attempts to establish chartered insurance com­panies.

They were fearful of the competition that they felt such cor­porations would bring. The would-be incorporators lost battle after battle until they learned the power of money over common-sense reasoning.

Their lesson learned, they proposed to hand over to the treasury 600,000 in exchange for two corporation charters and a monopoly of corporate underwriting in the field of marine insur­ance. The King, eyeing this bribe, sent a royal message to the House of Commons recommending the granting of the charters. This monopoly left the door to life insurance basics wide open

The charters, although not without serious opposition, were granted in 1720 to the London Assurance Corporation and the Royal Exchange Assurance Corporation. The agreement provided that if the ,600,000 were not paid as promised, the charter would be sub­ject to forfeiture.

Since these companies were not overly successful in the early years of their operations, they were unable to pay the installments. Luckily for them, however, one of their sponsors had influence with Parliament and persuaded that legislative body to reduce the debt to 150,000, which was later paid.

Since the mo­nopoly was restricted only to marine insurance, other corporations entered the life insurance and fire insurance fields. The marine monopoly was finally broken in 1824, and these new corporations later extended their activities to marine insurance. Capital stock companies are now im­portant underwriters in all lines of insurance.

A stock insurance company is much like any typical business cor­poration. Its capital fund and paid-in surplus are subscribed by the stockholders. These stockholders, operating through the company, assume the risk of loss and, in return for that risk, are entitled to the profits.

Operating losses are paid out of the capital and surplus of the company, which in the final analysis belong to the stockholders. Liability of the company, however, is assumed in its corporate ca­pacity. The stockholders are not subject to additional assessments. Management control rests with the stockholders, who elect the board of directors.

Policyholders are simply customers of the com­pany and, as a general rule, are charged a definite and fixed pre­mium. Capital stock companies usually acquire their business through agents and brokers.

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