USA > Connecticut > Tercentenary pamphlet series, v. 3 The Beginnings of Roman Catholicism in Connecticut > Part 5
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It was fortunate that the Federal Reserve Act came when it did, for it exercised a stabilizing influence when the war broke out in Europe in the ensuing year. The con- fusion necessarily accompanying such a catastrophe was
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short. During the war years, even after this country be- came a belligerent, there is no mention that the writer has found in the bank commissioners' reports of the war's specific effects in Connecticut. New banking institutions were organized and the state was prosperous. For example, in 1916, savings bank deposits increased $26,694,621.65 and savings deposits in trust companies $10,227,972.13. The readjustments after the war, following the old se- quence, involved a loss in savings bank deposits of about $5,000,000 in the year ending October 1, 1921, and deposits in savings departments of trust companies shrank approximately $1,500,000. The following year deposits in savings banks increased almost $8,000,000 and savings departments of trust companies showed a gain in deposits of $5,500,000.
XII
THE postwar depression, caused perhaps chiefly by the sudden brake on production, the cancellation of con- tracts, the necessity of liquidating overstocked inven- tories, together with all the complexities resulting from our position as a creditor nation, was not serious or pro- longed. Nevertheless, Connecticut, a large munition- producing state, had its business troubles and incidentally many banks took heavy losses. Their strong resources in accumulated surplus and profits, and most of all the assurance to members that the Federal Reserve Banks were behind them, prevented any real apprehension, and no banking institution in the state had to close on ac- count of the economic disturbances immediately follow- ing the World War.
On the whole, the country slipped easily into the years of the Great Boom. Those years of exaltation have be- come a somewhat painful memory and they are not to be
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dwelt upon here. It may be noted in passing that toward the end, bankers found themselves undergoing the un- usual experience of seeing many large corporations em- ploying their surplus cash in call loans-a rather signifi- cant commentary on the times. It was the greatest boom that has followed any war in which the United States has been engaged, and has been succeeded by the most pro- longed and discouraging depression-largely so because it was world-wide. There is no space here to discuss, nor would there be propriety in discussing, the manifold complexities that have followed one another in the finan- cial world since October, 1929.
How have Connecticut banks pulled through these strange years? In the bank commissioner's report as of September 29, 1934, there appeared sixteen closed state banks and trust companies in Connecticut. Of these, two closed in 1930, seven in 1931, four in 1932, and three in 1933. Half of them were in reasonably large cities. Four state institutions previously closed had been reorganized and reopened; in some other cases there had been mer- gers, consolidations, or sales of assets. During the years since the Connecticut banking act of 1933 was passed which, among other provisions, let down the bars to branch banking under certain restrictions (as did the national act passed in the same year), several smaller in- stitutions have been taken over by larger banks, state and national, as branches-a development which so far promises well in Connecticut.
The national banks in the state made a good showing. Perhaps this may have been due to the Federal Reserve influence, but the various factors are so confused that one cannot be dogmatic. Of course, many state institutions were Federal Reserve members. On October 4, 1929, there were sixty-two national banks in Connecticut. One
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disappeared from the roll in the report of the comptroller of the currency for 1930. In 1931 the number remained static. The report for 1932 showed a loss of three, leaving fifty-eight which survived the crisis of 1933. The comp- troller's report for 1934 is not at this writing available, but it is known that two of the closed national banks have been reorganized and reopened.
No mutual savings bank in Connecticut failed during these years. Indeed there has been no failure among these institutions since 1911, when one of the smaller banks had to close its doors. On occasion since 1929 savings institu- tions, pretty generally throughout the state, have been compelled as a matter of prudence to invoke the with- drawal notice, but the necessity for this passed in every case within a comparatively short period. The deprecia- tion in the real estate market, of course, affected the whole mortgage situation. With this the savings banks were deeply concerned, for their mortgage loans probably constituted their most puzzling problem. Notwithstand- ing this and other difficult questions, the bank commis- sioner's report showed a net increase in assets for the year ending September 29, 1934, of more than $14,300,000, and an increase in deposits of over $15,500,000. It is unnecessary to emphasize the reassuring implications of these figures. An additional safeguard among the savings banks has been the formation of a liquidity fund in the form of a corporation authorized by the general assembly of 1933, known as the Mutual Savings Banks' Central Fund, Incorporated. Most of the savings banks of the state are members of this. The rate of mutual savings bank dividends and of interest on savings deposits in state banks and trust companies, not Federal Reserve members, has been restricted to three per cent a year since November, 1934. The rate on savings deposits in
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national banks and other members of the Federal Reserve system is, at this writing, two-and-one-half per cent. These rates reflect government policy and the lower re- turn on the high-grade securities to which these savings banks and departments are restricted in investment.
XIII
IN view of the magnitude of the menace and the tremen- dous number and immense importance of details that had to be worked out in haste, it is fair to say that the crisis of March, 1933, was adroitly and successfully handled. The efforts toward readjustment were helped by the restraint and good temper of the people. In Connecticut there was trouble enough, but no major catastrophe. Perhaps one source of strength was the fact that in this state there were, as a result of the consolidations and mergers of the previous years, more large and strong banks than ever before. The virtual abandonment of the gold standard is memorable historically as well as for its practical effect and for the widespread discussions which it aroused.
It seems likely that, when the history of these present years comes to be written, the attempt to relieve the distress caused by unemployment through the expendi- ture of gigantic sums for that purpose will be one of the outstanding phenomena of the period. It is an extraordi- nary effort, reflecting the greatest credit upon the altruism of the American people. Yet it cannot be denied that the necessity for liquidating these great sums (and others) creates a financial problem, of which we do not yet see the solution.
Among other effects, this expenditure of vast amounts has resulted in flooding the banks, as well as other sources of investment, with government securities. The credit of the government is so good that these securities
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yield what seems to those remembering other investment conditions a ridiculously low rate of interest, and this, combined with the dearth of applications for loans, cramps to a degree the earning power of banks in general. But there is some compensation in increased liquidity.
As this is written, a bill is pending in congress, of which the main controversial features are a proposed modifica- tion in the Federal Reserve structure looking toward stronger government, not to say political, control, and an extension of the guaranty of bank deposits.4 It may be said without fear of contradiction that these measures, in their proposed form, do not commend themselves to Connecticut bankers. By a recent act of the assembly of 1935 state banking institutions are prohibited from en- tering any deposit insurance plan to which an unlimited liability is attached. Connecticut has been a conservative state and will probably remain so.
4 This sentence should be read with the understanding that, after this Pamphlet had gone to press, congress enacted and the president approved the federal banking act of 1935 which modifies in some respects the provi- sions to which reference is made.
Bibliographical Note
FOR a fuller account, consult Joseph G. Woodward, Currency and banking in Connecticut (in W. T. Davis, New England states, vol. 2, pp. 617-682). Some useful information will also be found in Richard J. Purcell, Connecticut in transition, 1775-1818 (Washington, 1918); Jarvis M. Morse, Neglected period of Connecticut's history, 1818-1850 (New Haven, 1933); P. Henry Woodward, One hundred years of the Hartford Bank (Hartford, 1892); Charles W. Burpee, First century of the Phoenix National Bank (Hartford, 1914); and Henry W. Erving, The Con- necticut River Banking Company, one hundred years of ser- vice (Hartford, 1925).
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TERCENTENARY COMMISSION OF THE STATE OF CONNECTICUT
QUI
SUSTINET
TRANSTULIT
COMMITTEE ON
HISTORICAL PUBLICATIONS
XLIII A History of Insurance in Connecticut ARCHIBALD ASHLEY WELCH
PUBLISHED FOR THE TERCENTENARY COMMISSION BY THE YALE UNIVERSITY PRESS
1935
The Printing-Office of the Yale University Press
TERCENTENARY COMMISSION OF THE STATE OF CONNECTICUT
COMMITTEE ON HISTORICAL PUBLICATIONS
XLIII
A History of Insurance in Connecticut
ARCHIBALD ASHLEY WELCH'
I I
NSURANCE as now known is a comparatively recent method of recompensing against loss by death, accident, fire, and all the other untoward happenings in life, yet insurance is actually as old as society itself.
When Thomas Hooker and his little band of early settlers first erected their huts, stockades, and meeting- house, each man knew that he could depend on all the others in the settlement to guard him from hostile In- dians; to care for him if he were disabled; to help rebuild his home if it were burned; and to care for his dependent family if he should die. It was the most complete insur- ance coverage that one could have, and yet not a single contract was written and probably not a verbal promise
" The manuscript for this Pamphlet was submitted to the committee only a short time before the lamented death of Mr. Welch on May 8, 1935. Con- sequently, the text has been printed as nearly as practicable as written, except that the statistical material has been brought up to date through the courtesy of the insurance commissioner. EDITOR.
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was given. The character of their associates gave these settlers all the assurance that was needed.
As hamlets grew into villages, villages into towns, and towns into cities, more and more these responsibilities which had at first been personal and optional were as- sumed by the communal corporation. Fire and police departments, hospitals, and other municipal agencies ministered to the comfort and the safety of the citizens, but no recompense was provided for the sufferer by fire, accident, or death. Of course the hat was passed by sympathetic friends when some catastrophe had over- whelmed a near neighbor, but that was, for both the givers and the receivers, a most unsatisfactory method of providing recompense. It was but natural that some way should be found to provide the relief that now is secured through insurance. As had happened at other times and in other countries, so in Connecticut it was marine in- surance that first made its appearance.
Hartford was at the head of sloop navigation on the Connecticut river, and at the close of the eighteenth century sea-borne trade was one of the profitable business ventures engaged in by the residents of Hartford, New Haven, New London, and several other Connecticut ports. These ventures entailed considerable financial risk, not alone from storms at sea but also from pirates and from ships of so-called friendly nations. Under such con- ditions there sprang up in Hartford a plan by which any losses that occurred were shared by others than the owner of the vessel, and in return for the risks these in- surers shared in the profits of the voyage, if there were any.
This insurance was effected by contracts between in- dividuals. A number of underwriters would agree to assume in specified proportions insurance on a vessel or cargo (later on goods or a house), one of their number
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acting as agent for the group. Such early contracts were written by hand. But, in 1794, the first printed policy appeared and, because it is the oldest printed fire insur- ance policy that we have and the one from which present forms evolved, it is given below. The italics represent the pen-written parts of the document. It should be remem- bered, too, that the Hartford Fire Insurance Company mentioned in this policy was not the present well-known company of that name, as the latter was not incorporated until 1810. The company referred to in the policy was an unincorporated group of individuals who had become the underwriters of this particular risk.
WHEREAS William Imlay, Esq., of Hartford, or whom else it may concern, wholly or partly, Friend or Foe, doth make Assurance on His House against Fire, and all dangers of Fire; moreover against all Damage which on Account of Fire may happen, either by Tempest, Fire, Wind, own Fire, Negligence and Fault of own Servants, or of Neighbors, whether those nearest or furthest off; all external Accidents and Misfortunes; thought of or not thought of, in what manner soever the damage by Fire might happen; for the space of one year com- mencing on the eighth day of February, 1794, and ending on the eighth day of February, 1795, both at twelve o'clock at Noon, valuing specially and voluntarily the said House at the Sum Insured .- And the Assured, or whom it may concern, in case of Damage, or Hurt, shall need to give no Proof nor account of the Value; but the producing this Policy shall suffice. And in case it should happen that the said House, the Whole or Part, are burnt and suffer Damage, on that Account, we do hereby promise punctually to pay and ratify, within the space of three Months after the Fire shall have happened, due Notice having been given to us, and no Deduction to be made from the Sum assured except Two and an Half per Cent., provided said Loss amounts to Five per Cent., under which no Loss or Damage will be paid. And in case of a partial Loss, all that shall be found to be saved and preserved, shall be deducted, after the Deduction of the Charges paid for the saving and preserving;
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and concerning which the Assured shall be believed on his Oath, without our alledging any thing against it. And so we the Assurers are contented, and bind Ourselves and Goods present and to come, renouncing all Cavils and Exceptions contrary to these Presents, for the true Performance of the Premises, the Consideration due unto us for this Assurance by the Assured, at and after the Rate of one-half per cent.
Reciprocally submitting all Differences to two Persons, One to be chosen by the Assured out of Three to be named by the Assurer, the other by the Assurer or Assurers, out of Three to be named by the Assured, who shall have full Power to adjust the same; but in case they cannot agree, then such two Persons shall choose a Third, and any two of them agreeing, shall be obligatory to both Parties.
In Witness Whereof, We the Assurers have subscribed our Names and Sums assured in Hartford the 8th day of February,
One Thousand Seven Hundred and Ninety-four.
£800 Sanford & Wadsworth Eight hundred for the Hartford Fire Insurance Company S Pounds.
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WHEN protection had been developed thus far, the next natural step was to form corporations to take the place of individual underwriters. This occurred in Connecticut before the opening of the nineteenth century. The first insurance company incorporated in Connecticut is still in existence. In May, 1795, the Mutual Assurance Com- pany of the City of Norwich was incorporated and began business. It issued policies only from its home office and through its agency in New London. From the beginning, it has never tried to secure a large amount of insurance, but has contented itself with insuring only the property of individuals known personally by the officers. In 1801 the Mutual Assurance Company was organized in New Haven, but very soon faded out of existence.
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The oldest stock fire insurance company2 in the state is the Hartford Fire Insurance Company, incorporated in 1810. Next in age is the Aetna [Fire ] Insurance Company of Hartford, which was incorporated nine years later. Since these were the two outstanding companies organized in the first half of the nineteenth century-the formative period of stock fire insurance companies-it will be inter- esting to consider some points of their early history.
From the very beginning of insurance in Connecticut, this industry seems to have been initiated and developed by men of outstanding character and ability, men whom the present generation is proud to regard as its political and financial, if not its natural, forebears.
Woodward, in his Insurance in Connecticut, wrote:
Experiments in underwriting have been freely made in nearly all the cities of the state. With the exception of a few mutual fire companies, outside of a single town, almost every venture has ended in disaster. In many instances the tradition of their existence has faded out, even in the communities where they once flourished. If questioned on the point the local antiquary looks blank and asks for time. Of them it can generally be said that they were managed with ordinary ability, and were destroyed by extraordinary calamities.
Hartford stands forth a conspicuous exception. Though in size but a speck on the map of the world, she has few rivals in
2 Marine insurance companies were incorporated at New Haven in 1797, at Hartford, Middletown, and Norwich in 1803, and at New London in 1805. These were apparently the earliest incorporated stock insurance companies in Connecticut. The Middletown company ceased operations about 1820, and the New Haven and New London companies in the 1830's. The Hartford company was made up substantially of the individuals who appeared as the Hartford Insurance Company in 1794 (incidentally, many of them were prominent original stockholders of the Hartford Bank, organized in 1792); this company was reorganized as the Protection [Fire] Insurance Company in 1825, which suspended operations in 1854 after a notable career. The company in Norwich became the Norwich Fire Insurance Company in 1818 and maintained a modest existence until overwhelmed by the Chicago fire in 1871. EDITOR.
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underwriting, while the oldest, richest and biggest cities on the planet would be rash to claim superiority. To comprehend the situation as presented to-day we must review the history of the men who laid the foundations, and of their successors who have reared the superstructure.
In the first directorates of these two companies, the Hartford and the Aetna, were the following well-known names: Nathaniel Terry, Nathaniel Patten, David Wat- kinson, Daniel Buck, Thomas Glover, Thomas K. Brace, James H. Wells, Ward Woodbridge, and Henry Hudson forming one board; and Thomas K. Brace, Thomas Belden, Samuel Tudor, Jr., Henry Kilbourn, Eliphalet Averill, Henry Seymour, Griffin Stedman, Gaius Lyman, Judah Bliss, Caleb Pond, Nathaniel Bunce, Joseph Morgan, Jeremiah Brown, James M. Goodwin, Theodore Pease, Elisha Dodd, and Charles Babcock comprising the other. The stockholders of these companies included many other well-known men. These were the men to whom Woodward referred. Two events in fire insurance history will show how honestly and how courageously these directors met their responsibilities. They placed a hallmark on Hartford insurance that is now considered a priceless heritage.
In December, 1834, occurred the great New York fire. It leveled nearly seven hundred buildings and caused a loss of $20,000,000, an amount which, one hundred years ago, seemed overwhelming. News of this disaster reached Hartford on a bitterly cold, winter morning. Eliphalet Terry, president of the Hartford Fire Insurance Com- pany, had no elaborate maps from which he could esti- mate the extent of his losses. All he knew was that the metropolis of the country had suffered from an unusual conflagration; that his company had insurance on build- ings in the burned district; and that, if ever fire insurance
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was to demonstrate its worth to society, this was the opportunity. He called at the Hartford Bank, secured a blanket promise to honor any and all drafts he might make on behalf of his company and, as security for this promise, pledged his private fortune. With the ther- mometer registering below zero, he started for New York in a sleigh. On his arrival, he found that most of the in- surance companies of New York had become bankrupt. Sufferers from the fire were in consternation and despair, and property owners outside the burned districts had concluded that fire insurance had failed in its mission.
Terry refused to be overcome by the desolation about him. Calmly he announced that he would pay in full all claims against his company. At the same time, he offered new insurance to those who desired it. The effect of this quiet, businesslike statement from a gentleman whose manner betokened a thorough knowledge of the situation was electric. It brought mental as well as financial relief to the distressed sufferers and restored their confidence. By this bold act, the legitimacy of fire insurance protec- tion was established by a Hartford man who had faith in the business of fire insurance, trust in the backing of his board of directors, and confidence that the courageous payment of just losses was the very best way to establish a similar faith, trust, and confidence in the minds of the public. His judgment was correct. Premiums came rush- ing in to the company which had met its obligations squarely. What at first had seemed a tragedy for the company, in the end turned out to be a blessing.
Eleven years later a second fire swept New York. It was not so devastating as the first but it was much more costly to another Hartford company, the Aetna. As soon as the news reached Hartford, Thomas K. Brace, presi- dent of the Aetna Insurance Company, called his board
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of directors together and explained that the losses would probably exhaust the entire resources of the company. Going to the safe, he took all the certificates of stocks and bonds owned by the company and placed them on the directors' table. "What are you going to do, Mr. Brace?" asked one of his directors. "Do?" he replied, "I am going to New York to pay all our losses, if it takes every dollar there (pointing to the securities) and my own fortune as well." "We will stand back of you with our fortunes," came the quick response from his board. So, a second time, the faith, trust, and confidence of Hartford men in Hartford insurance were shown to the world. This New York fire of 1845 may well mark the end of the first chapter in the history of Connecticut fire insurance. The value to the community of fire insurance and the ability of Connecticut companies to furnish this service had been demonstrated-and in dramatic manner.
III
BETWEEN 1845 and 1871, the date of the great Chicago conflagration, nearly a score of new fire insurance com- panies was organized in Connecticut. Among them were the Connecticut, organized in 1850; the Phoenix, organ- ized in 1854; the National, built in 1871 on the ashes of the Merchants which succumbed to the Chicago fire; and the Orient, launched in 1867-all of Hartford.
These four new corporations were formed with boards of directors and officers of the same character and ability as had brought success to the older companies. The evi- dence of this was the way in which all these Hartford companies fulfilled their obligations when Chicago was visited by the devastating fire of 1871. This story was succinctly told in the report of the Connecticut insurance commissioner published in 1872:
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The Chicago Fire ranks as the most destructive of all modern conflagrations. A moderate estimate places the value of property actually destroyed by fire at One Hundred and Forty Million dollars. ... About Ninety-Two Million dollars was covered by insurance, in two hundred and fifty-six com- panies, American and foreign. ... Excepting alone those of Chicago, on no companies in proportion to numbers has the recent disaster borne more heavily than upon those of our own State. Of the eleven Connecticut companies involved in Chicago, viz: the Aetna, Hartford, Phoenix, City, Charter Oak, Connecticut, Merchants, North American, Putnam, Norwich, and Fairfield County, only four, the first three and last one named, survived, with the ability to pay losses in full. .. . With a promptness worthy of commendation, the officers of the Aetna, Hartford, and Phoenix, on ascertaining the extent of impairments called meetings of their respective stockholders and ... voted to reduce capital 50 per cent., and subsequently voted to increase again to the former amounts. The new stock was promptly subscribed by the old stockholders of the re- spective companies, paid up and invested as required by law.
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