THE HISTORY OF A FIRE AND MARINE INSURANCE COMPANY.

Kumara Times, Issue 1170, 29 June 1880, Page 4

THE HISTORY OF A FIRE AND MARINE INSURANCE COMPANY.

[timartt HERALD J The following history of a Fire Insurance Company is of considerable importance to the whole community. We are all interested in upholding a healthy state of trade, and anything that detracts from this condition cannot be too often denounced. Over competition in business is one of the great evils from which seller and buyer alike suffer. Our suspicions should always be on the alert when an unusually low, price is quoted for any article, as ii may be the old story repeated, of the razors that were meant to sell, and not to shave. It is a wise provision of our Home Legislature, in these days of South Sea Bubble Companies, that every Life Insurance Company, before they are licensed to accept risks, must deposit the sum of L 20.000. Unfortunately this deposit is not demanded from Fire and Marine Insurance Companies, or we would not have to chronicle one of the most deliberate and severe swindles that was ever perpetrated on a too credulous public. In Jannary, 1876, the Northern Counties of England Fire Insurance Company, Limited, wasduly incorporated. Its founder arid manager, Mr James Edward Crabtree, was a man of con aummate ability and boldnass. The Company was established as a non-tariff office, with a nominal registered capital of LIOO,OOO, in L 5 shares. The manager, to assure a good basis to work from, had himßelf appointed one of the first directors of the Company. The head office was in Manchester, and the Company was duly launched into its sea of troubles, with the magnificent paid up capital of LSOOO. Risks of the most hazardous description were taken at preposterously low rates; the Company not refusing to insure anything that was not actually on fire. Branches were established all over the United Kingdom and on the Continent. A noble Count had charge of the foreign business, and the manner in which this worthy dazzled the foreigners with his free and dashing style, and princely expenditure, gave the natives of the principal cities, including St. Petersburg, Constantinople, and Paris, a childlike belief in the institution which he represented. But the manager excelled the worthy Count in his naboblike display of grandeur. He bought large estates, with a magnificent house, AineriQs, outhouses, and stables, all being in tho most splendid style. A carriage and two horses with flunkies ad lib., were only a few of the accessories to all this wonderful tout ensemble. The company took marine risks also. Their first loss was on an East Indiaman of LU.OOO, which was paid promptly for the purpose of establishing public confidence. Up to this time the Company had a wonderful run of luck, and the ability with which the manager manipulated the balance-sheets, showing large income premiums, and extensive profits, gave to the public a thorough confidence in the concern. The manager for the purpose of keeping his own secret, persuaded the directors to capitalise the bogus profits, passing 10s per share to the credit of the paid up share account. One of the manager's reasons for this step was to cover 3 the heavy drawings that he was constantly making for his own use from the funds of the company. Two of the directors were confederates of the manager, but the others were thoroughly hoodwinked, placing the most implicit confidence in their "awfully clever and energetic manager." The manner in which mythical and bogus securities were manufactured was astonishing. There could not have been any system of audit at all, or if so, the auditors must have been in the swim also. The shares were Betling before the crush came, atLB andLlOon the Stock Exel.ange. Crabtree and two of the directors held a large portion of the shares, and they all sold out previous to the bubble bursting. Ultimately money began to get tight, and there was delay in settling claims. When Crabtree found that the plank was going from underneath him, he withdrew from the company, and filed his schedule, his liabilities being 160,000; the sum of 146,476 being due to the Company. Some of the directors followed the noble example set by their " clever and energetic manager," and others divested themselves of their properties by making assignments. One poor deluded director had invested L 40.000 in the shares of the Company, being halt the amount of the pa'd up capital. How some of the directors could have been deluded into the belief that the Company had an actual paid up capital of L 241,836, instead of LBO.OOO, is a mystery, and shows us how careful we should be in placing too much power in the hands of any one man. Tho accounts and books of public Companies, including Building Societies, Banks, and Insurance Companies cannot be too often nor too carefully audited.