fHE Insurance oe Cargoes. 
11 
the open market. Another suggestion was to offer cargo-owners insurance, at a premium, 
from the first port of call of a vessel after the outbreak of war ; or, alternatively, to offer 
such cover to those cargo-owners who had and exercised an option to order their cargoes 
to a British port from a port of call. These suggestions, if acted on, would in our 
opinion afford an inducement to cargo-owners to discontinue all war risk insurance in 
the open market in future. The main inducement to a cargo-owner to insure these risks 
at present (apart from the insistence of bankers in certain trades) is the fear that, if 
war becomes imminent or breaks out, he may not be able to effect his insurance at all. 
If you give him the certainty of being able to cover this insurance, he may consider it 
unnecessary to continue to insure in the market. He will be saving premiums on a very 
large number of transactions, and will not much mind what premium he has to pay on 
the few shipments or cargoes he may have afloat when war breaks out, as long as he 
knows for certain that, at a price, he can cover these risks. There is also the possibility 
that, in respect of cargo actually insured in the market, the underwriters would, if the 
State insurance were established before the outbreak of war, reinsure these risks with 
the State when war broke out, and to that extent the State facilities would not benefit 
■cargo-owners but only relieve underwriters. 
54. We also considered a suggestion that the State should limit its protection to 
insured cargoes by undertaking to reimburse underwriters for 80 per cent, of the actual 
losses they were called upon to pay in respect of insured cargo afloat on the outbreak 
of war. But it was pointed out that, if insurance were thus made a condition of 
obtaining State protection, this meant handing over cargo-owners, bound hand and 
foot, to the insurance market, while there would not be any means of controlling the 
rates of premium charged by underwriters to cover these risks. Even if the State 
confined its offer to such cases where the premium charged was limited to a certain 
rate, it would not be possible to compel underwriters to work at that rate. If they 
did not consider it sufficiently remunerative they would simply decline the risks 
altogether. 
55. It was also suggested that the State should be prepared to open an insurance 
office for war risks, when the insurance market, before the actual outbreak of war, was 
demoralised owing to the serious nature of the outlook. But if this were done, the 
opening of the State office might not unreasonably be construed bv the British public— 
and possibly by the potential enemy as well—as an admission on the part of the 
Government that war was inevitable. Besides, it might quite conceivably happen that 
the State would find that it had insured enemy goods against war risk at such a 
time. Suppose, for instance, a British steamer to be sailing from Hamburg to Chile 
with goods consigned to a German house there, and the w r ar risk on these goods is 
offered to the State office at a time of extreme tension between this country and 
Germany. If the principle we recommend later on is accepted, that the State 
insurance of war risk on cargo should be extended to all cargo (other than enemy 
cargo) in British bottoms, irrespective of the nationality of the owner of such cargo, 
the State office could not on that account refuse to accept this insurance before the 
outbreak of war. It is true that a similar situation might conceivably arise after the 
actual outbreak of war ; but at that time the transaction would have to be carried out 
1,1 the name of a British or neutral firm, who would have to face the risk of exposure 
and its consequences. Many of these schemes had the further objection that they 
postulated the establishment of a Government office in times of peace to deal with any 
business that was offered to it. An essential condition of any scheme of State 
insurance of cargo is, in our opinion, that it should not compete with the insurance 
market as long as that market is prepared to transact the business offering and to 
charge reasonable rates. It should only intervene when the ordinary channels for 
insurance are no longer available, or available only at prohibitive rates. It might 
therefore happen that the State offide would be in existence at considerable annual cost, 
for a great number of years, without transacting any business. 
56. Besides, we were informed that unless State action is confined to the period 
after the outbreak of war, or is limited to a time of panic, the insurance market would 
not view such action with favour. This is a very important consideration, as it is, in 
nur opinion, essential to the success of the proposals set forth later in this Report for 
State insurance of cargo starting after the outbreak of war, that the scheme should 
have the hearty support and co-operation of the insurance market. 
57. For all these reasons we are unable to recommend any scheme for the 
insurance against war risks by the State of cargo afloat at the outbreak of war. We 
ully realise, as we have already pointed out, that this may be regarded as unfair 
teatment of cargo, in view of the proposals we have made for the protection of hulls