or, in contemplation of bankruptcy, has destroyed or falsified his books, or concealed property to amount of 101; or, if any person having proved a false debt under the commission, such bankrupt, being privy thereto, or afterwards knowing the same, has not dis closed it to his assignees within 1 month after such knowledge. Lastly, upon request by the bankrupt, the official assignce is re quired to declare to him how he has disposed of his property, and account to him for the surplus, if any but before any surplus can be admitted, in erest must be paid, first, on all debts proved that carry interest, at the rate payable thereon; and next, upon all other debts, at the rate of 41. per cent., to be calculated from the date of the commission. I. Account of the Number of Commissions of Bankruptcy issued from 1790 to 1821. II. Account of the Number of Commissions of Bankrupt and Fiats issued each Year, from 1822 to 1832 both included; distinguishing Town Commissioners and Fiats, and showing how many Country Commissions and Fiats were opened in each Year.-(Purl. Paper, No. 342. Sess. 1833.) 19,376 7,563 Total country commissions and fiats opened 7,521 Total commissions and fiats sealed and signed in the above period III. Total Number of Persons discharged from Prison under the Acts for the Relief of Insolvent Debtors since the Constitution of the present Court in 1820; and the Number who have been ordered to be detained in Custody for contravening the Provisions of the Acts for the Relief of Insolvent Debtors.-(Parl. Paper, No. 141. Sess. 1831, and Papers published by Board of Trade.) N. B.-The Court makes no orders of detention; and the following Table shows all the judgments given to the 30th of June, 1831. Ordered to be discharged forthwith. Ordered to be discharged at some future Period. [By the constitution of the United States "Congress shall have power to establish uniform laws on the subject of bankruptcies through the United States." This power, however, has only been exercised for a very short period. An act establishing a uniform system of bankruptcy was passed on April 4th, 1800. It was limited to five years, and thence to the end of the next session of Congress, but was repealed by the act of December 19th, 1803. The power of Congress in respect to bankruptcies has been adjudged not to be exclusive. So long as Congress refuse to exercise it, the respective states may pass bankrupt, or, what amounts to the same thing, insolvent laws; but such laws must not be of a nature to impair the obligation of contracts made prior to their passage. State insolvent laws are, moreover, invalid as to all contracts, whether prior or posterior to their existence, to which citizens of other states are parties.-See Kent's Commentaries on American Law, Sect. 37.-Am. Ed.] INSURANCE, a contract of indemnity, by which one party engages, for a stipulated sum, to insure another against a risk to which he is exposed. The party who takes upon him the risk, is called the Insurer, Assurer, or Underwriter; and the party protected by the insurance is called the Insured, or Assured; the sum paid called the Premium; and the instrument containing the contract is called the Policy. I. INSURANCE (GENERAL PRINCIPLES OF). III. INSURANCE (FIRE). IV. INSURANCE (LIFE). I. INSURANCE (GENERAL PRINCIPLES OF). It is the duty of government to assist, by every means in its power, the efforts of individuals to protect their property. Losses do not always arise from accidental circumstances, but are frequently occasioned by the crimes and misconduct of individuals; and there are no means so effectual for their prevention, when they arise from this source, as the establishment of a vigilant system of police, and of such an administration of the law as may be calculated to afford those who are injured a ready and cheap method of obtaining every practicable redress; and, as far as possible, of insuring the punishment of culprits. But in despite of all that may be done by government, and of the utmost vigilance on the part of individuals, property must always be exposed to a variety of casualties from fire, shipwreck, and other unforeseen disasters. And hence the importance of inquiring how such unavoidable losses, when they do occur, may be rendered least injurious. The loss of a ship, or the conflagration of a cotton mill, is a calamity that would press heavily even on the richest individual. But were it distributed among several individuals, each would feel it proportionally less; and provided the number of those among whom it was distributed were very considerable, it would hardly occasion any sensible inconvenience to any one in particular. Hence the advantage of combining to lessen the injury arising from the accidental destruction of property and it is the diffusion of the risk of loss over a wide surface, and its valuation, that forms the employment of those engaged in insurance. Though it be impossible to trace the circumstances which occasion those events that are, on that account, termed accidental, they are, notwithstanding, found to obey certain laws. The number of births, marriages, and deaths; the proportions of male to female, and of legitimate to illegimate births; the ships cast away; the houses burned; and a vast variety of other apparently accidental events; are yet, when our experience embraces a sufficiently wide field, found to be nearly equal in equal periods of time: and it is easy, from observations made upon them, to estimate the sum which an individual should pay, either to guarantee his property from risk, or to secure a certain sum for his heirs at his death. It must, however, be carefully observed, that no confidence can be placed in such estimates, unless they are deduced from a very wide induction. Suppose, for example, it happens, that during the present year one house is accidentally burned, in a town containing 1,000 houses; this would afford very little ground for presuming that the average probability of fire in that town was as 1 to 1,000. For it might be found that not a single house had been burned during the previous 10 years, or that 10 were burned during each of these years. But supposing it were ascertained, that, on an average of 10 years, I house had been annually burned, the presumption that 1 to 1,000 was the real ratio of the probability of fire would be very much strengthened; and if it were found to obtain for 20 or 30 years together, it might be held, for all practical purposes at least, as indicating the precise degree of probability. Besides its being necessary, in order to obtain the true measure of the probability of any event, that the series of events, of which it is one, should be observed for a rather lengthened period, it is necessary also that the events should be numerous, or of pretty frequent occurrence. Suppose it were found, by observing the births and deaths of 1,000,000 individuals taken indiscriminately from among the whole population, that the mean duration of human life was 40 years; we should have but very slender grounds for concluding that this ratio would hold in the case of the next 10, 20, or 50 individuals that are born. Such a number is so small as hardly to admit of the operation of what is called the law of average. When a large number of lives is taken, those that exceed the medium term are balanced by those that fall short of it; but when the number is small, there is comparatively little room for the principle of compensation, and the result cannot, therefore, be depended upon. It is found, by the experience of all countries in which censuses of the population have been taken with considerable accuracy, that the number of male children born is to that of female children in the proportion nearly of 22 to 21. But unless the observations be made on a very large scale, this result will not be obtained. If we look at particular families, they sometimes consist wholly of boys, and sometimes wholly of girls; and it is not possible that the boys can be to the girls of a single family in a ratio of 22 to 21. But when, instead of confining our observations to particular families, or even parishes, we extend them so as to embrace a population of 500,000, these discrepancies disappear, and we find that there is invariably a small excess in the number of males born over the females. The false inferences that have been drawn from the doctrine of chances, have uniformly, almost, proceeded from generalising too rapidly, or from deducing a rate of probability from such a number of instances as do not give a fair average. But when the instances on which we found our conclusions are sufficiently numerous, it is seen that the most anomalous events, such as suicides, deaths by accidents, the number of letters put into the post-office without any address, &c., form pretty regular series, and consequently admit of being estimated à priori. The business of insurance is founded upon the principles thus briefly stated. Suppose it has been remarked that of forty ships, of the ordinary degree of sea-worthiness, employed in a given trade, 1 is annually cast away, the probability of loss will plainly be equal to one fortieth. And if an individual wish to insure a ship, or the cargo on board a ship, engaged in this trade, he ought to pay a premium equal to the 1-40th part of the sum he insures, exclusive of such an additional sum as may be required to indemnify the insurer, for his trouble, and to leave him a fair profit. If the premium exceed this sum, the insurer is overpaid; and if it fall below it, he is underpaid. Insurances are effected sometimes by societies, and sometimes by individuals, the risk being in either case diffused among a number of persons. Companies formed for carrying on the business have generally a large subscribed capital, or such a number of proprietors as enables them to raise, without difficulty, whatever sums may at any time be required to make good losses. Societies of this sort do not limit their risks to small sums; that is, they do not often refuse to insure a large sum upon a ship, a house, a life, &c. The magnitude of their capitals affords them the means of easily defraying a heavy loss; and their premiums being proportioned to their risks, their profit is, at an average, independent of such contingencies. Individuals, it is plain, could not act in this way, unless they were possessed of very large capitals; and besides, the taking of large risks would render the business so hazardous, that few would be disposed to engage in it. Instead, therefore, of insuring a large sum, as 20,000., upon a single ship, a private underwriter or insurer may not, probably, in ordinary cases, take a greater risk than 2001. or 500%.; so that, though his engagements may, when added together, amount to 20,000l., they will be diffused over from 40 to 100 ships; and supposing 1 or 2 ships to be lost, the loss would not impair his capital, and would only lessen his profits. Hence it is, that while one transaction only may be required in getting a ship insured by a company, 10 or 20 separate transactions may be required in getting the same thing done at Lloyd's, or by private individuals. When conducted in this cautious manner, the business of insurance is as safe a line of speculation as any in which individuals can engage. To establish a policy of insurance on a fair foundation, or in such a way that the premiums paid by the insured shall exactly balance the risks incurred by the insurers, and the various necessary expenses to which they are put, including, of course, their profit, it is necessary, as previously remarked, that the experience of the risks should be pretty extensive. It is not, however, at all necessary, that either party should inquire into the circumstances that lead to those events that are most commonly made the subject of insurance. Such a research would, indeed, be entirely fruitless: we are, and must necessarily continue to be, wholly ignorant of the causes of their occurrence. It appears, from the accounts given by Mr. Scoresby, in his valuable work on the Arctic Regions, that of 586 ships which sailed from the various ports of Great Britain for the northern whale fishery, during the 4 years ending with 1817, 8 were lost-(vol. ii. p. 131),— being at the rate of about 1 ship out of every 73 of those employed. Now, supposing this to be about the average loss, it follows that the premium required to insure against it should be 17. 7s. 4d. per cent., exclusive, as already observed, of the expenses and profits of the insurer. Both the insurer and the insured would gain by entering into a transaction founded on this fair principle. When the operations of the insurer are extensive, and his risks spread over a considerable number of ships, his profit does not depend upon chance, but is as steady, and may be as fairly calculated upon, as that of a manufacturer or a merchant; while, on the other hand, the individuals who have insured their property have exempted it from any chance of loss, and placed it, as it were, in a state of absolute security. It is easy, from the brief statement now made, to perceive the immense advantage resulting to navigation and commerce from the practice of marine insurance. Without the aid that it affords, comparatively few individuals would be found disposed to expose their property to the risk of long and hazardous voyages; but by its means insecurity is changed for security, and the capital of the merchant whose ships are dispersed over every sea, and exposed to all the perils of the ocean, is as secure as that of the agriculturist. He can combine his measures and arrange his plans as if they could no longer be affected by accident. The chances of shipwreck, or of loss by unforseen occurrences, enter not into his calculations. He has purchased an exemption from the effects of such casualties; and applies himself to the prosecution of his business with that confidence and energy which nothing but a feeling of security can inspire. "Les chances de la navigation entravaient le commerce. tème des assurances a paru; il a consulté les saisons; il a porté ses regards sur la mer; il a interrogé ce terrible élément; il en a jugé l'inconstance; il en a pressenti les orages: il a épié la politique: il a reconnu les ports et les côtes des deux mondes; il a tout soumis à des Le sys calculs savans, à des théories approximatives; et il a dit au commerçant habile, au navigateur intrépide: certes, il y a des désastres sur lesquels l'humanité ne peut que gémir; mais quant à votre fortune, allez, franchissez les mers, déployez votre activité et votre industrie; je me charge de vos risques. Alors, Messieurs, s'il est primis de le dire, les quatre parties du monde se sont rapprochées."-(Code de Commerce, Exposé des Motifs, liv. ii.) Besides insuring against the perils of the sea, and losses arising from accidents caused by the operation of natural causes, it is common to insure against enemies, pirates, thieves, and even the fraud, or, as it is technically termed, barratry, of the master. The risk arising from the sources of casualty being extremely fluctuating and various, it is not easy to estimate it with any considerable degree of accuracy; and nothing more than a rough average can, in most cases, be looked for. In time of war, the fluctuation in the rates of insurance are particularly great: and the intelligence that an enemy's squadron, or even a single privateer, is cruising in the course which the ships bound to or returning from any given port usually follow, causes an instantaneous rise in the premium. The appointment of convoys for the protection of trade during war, necessarily tends, by lessening the chances of capture, to lessen the premium on insurance. Still, however, the risk in such periods is, in most cases, very considerable; and as it is liable to change very suddenly, great caution is required on the part of the underwriters. Provision may also be made, by means of insurance, against loss by fire, and almost all the casualties to which property on land is subject. But, notwithstanding what has now been stated, it must be admitted, that the advantages derived from the practice of insuring against losses by sea and land are not altogether unmixed with evil. The security which it affords tends to relax that vigilant attention to the protection of property which the fear of its loss is sure otherwise to excite. This, however, is not its worst effect. The records of our courts, and the experience of all who are largely engaged in the business of insurance, too clearly prove that ships have been repeatedly sunk, and houses burned, in order to defraud the insurers. In despite, however, of the temptation to inattention and fraud which is thus afforded, there can be no doubt that, on the whole, the practice is, in a public as well as private point of view, decidedly beneficial. The frauds that are occasionally committed raise, in some degree, the rate of insurance. Still it is exceedingly moderate; and it is most probable, that the precautions adopted by the insurance offices for the prevention of fire, especially in great towns, where it is most destructive, outweigh the chances of increased conflagration arising from the greater tendency to carelessness and crime. The business of life insurance has been carried to a far greater extent in Great Britain than in any other country, and has been productive of the most beneficial effects. Life insurances are of various kinds. Individuals without any very near connections, and possessing only a limited fortune, are sometimes desirous, or are sometimes, from the necessity of their situation, obliged, annually to encroach on their capitals. But should the life of such persons be extended beyond the ordinary term of existence, they might be totally unprovided for in old age; and to secure themselves against this contingency, they pay to an insurance company the whole or a part of their capital, on condition of its guaranteeing them, as long as they live, a certain annuity, proportioned partly, of course, to the amount of the sum paid, and partly to their age when they buy the annuity. But though sometimes serviceable to individuals, it may be questioned whether insurances of this sort are, in a public point of view, really advantageous. So far as their influence extends, its obvious tendency is to weaken the principle of accumulation; to stimulate individuals to consume their capitals during their own life, without thinking or caring about the interest of their successors. Were such a practice to become general, it would be productive of the most extensively ruinous consequences. The interest which most men take in the welfare of their families and friends affords, indeed, a pretty strong security against its becoming injuriously prevalent. There can, however, be little doubt that this selfish practice may be strengthened by adventitious means; such, for example, as the opening of government loans in the shape of life annuities, or in the still more objectionable form of tontines. But when no extrinsic stimulus of this sort is given to it, there do not seem to be any very good grounds for thinking that the sale of annuities by private individuals or associations can materially weaken the principle of accumulation. Luckily, however, the species of insurance now referred to is but inconsiderable compared with that which has accumulation for its object. All professional persons, or those living on salaries or wages, such as lawyers, physicians, military and naval officers, clerks in public or private offices, &c., whose incomes must, of course, terminate with their lives, and a host of others, who are either not possessed of capital, or cannot dispose of their capital at pleasure, must naturally be desirous of providing, so far as they may be able, for the comfortable subsistence of their families in the event of their death. Take, for example, a physician or lawyer, without fortune, but making, perhaps, 1,000l. or 2,000l. a year by his business; and suppose that he marries and has a family: if this individual attain to the average duration of human life, he may accumulate such a fortune as will provide for the adequate support of his family at his death. But who can presume to say that such will be the case?—that he will not be one of the many exceptions to the general rule?— And suppose that he were hurried into an untimely grave, his family would necessarily be destitute. Now, it is against such calamitous contingencies that life insurance is intended chiefly to provide. An individual possessed of an income terminating at his death, agrees to pay a certain sum annually to an insurance office; and this office binds itself to pay to his family, at his death, a sum equivalent, under deduction of the expenses of management. and the profits of the insurers, to what these annual contributions, accumulated at compound interest would amount to, supposing the insured to reach the common and average term of human life. Though he were to die the day after the insurance has been effected, his family would be as amply provided for as it is likely they would be by his accumulations were his life of the ordinary duration. In all cases, indeed, in which those insured die before attaining to an average age, their gain is obvious. But even in those cases in which their lives are prolonged beyond the ordinary term, they are not losers-they then merely pay for a security which they must otherwise have been without. During the whole period, from the time when they effect their insurances, down to the time when they arrive at the mean duration of human life, they are protected against the risk of dying without leaving their families sufficiently provided for; and the sum which they pay after having passed this mean term is nothing more than a fair compensation for the security they previously enjoyed. Of those who insure houses against fire, a very small proportion only have occasion to claim an indemnity for losses actually sustained; but the possession of a security against loss in the event of accident, is a sufficient motive to induce every prudent individual to insure his property. The case of life insurance is in no respect different. When established on a proper footing, the extra sums which those pay whose lives exceed the estimated duration is but the value of the previous security. In order so to adjust the terms of an insurance, that the party insuring may neither pay too much nor too little, it is necessary that the probability of his life failing in each subsequent year should be determined with as much accuracy as possible. To ascertain this probability, various observations have been made in different countries and periods, showing, out of a given number of persons born in a particular country or place, how many complete each subsequent year, and how many die in it, till the whole be extinct. The results of such observations, when collected and arranged in a tabular form, are called Tables of Mortality; being entitled, of course, to more or less confidence, according to the number and species of lives observed; the period when, and the care with which, the observations were made, &c. But, supposing these Tables to be formed with sufficient accuracy, the expectation of life at any age, or its mean duration after such age, may readily be learned from them; and hence, also, the value of an annuity, or an assurance on a life of any age. Thus, in the Table of Mortality for Carlisle, framed by Mr. Milne, of the Sun Life Office, and which is believed to represent the average law of mortality in England with very considerable accuracy, out of 10,000 persons born together, 4,000 complete their 56th year; and it further appears, that the number of such persons who die in their 66th year is 124; so that the probability that a life now 56 years of age will terminate in the 10th year hence is 124 But, reckoning interest at 4 per cent., it appears (Table II. INTEREST AND ANNUITIES), that the present value of 100l. to be received 10 years hence is 67.556/.; consequently, if its receipt be made to depend upon the probability that a life now 56 years of age will fail in the 66th year, its present value will be reduced by that contingency to 124 x 67.5661. 2.0947., or 27. ls. 10d. The present value of 100%. receivable upon the life of a party now 56 years of age terminating in the 57th or any subsequent year of his life, up to its extreme limit (which, according to the Carlisle Table, is the 105th year), being calculated in this way, the sum of the whole will be the present value of 100%. receivable whenever the life may fail, that is, of 100%. insured upon it, supposing no additions were made to it for the profits and expenses of the insurers. 4,000 4.000 More compendious processes are resorted to for calculating Tables of insurances at all ages; but the above statement sufficiently illustrates the principle on which they all depend. In practice, a life insurance is seldom made by the payment of a single sum when it is effected, but almost always by the payment of an annual premium during its continuance, the first being paid down at the commencement of the insurance.* If the Table of Mortality adopted by the insurers fairly represent the law of mortality prevailing among the insured, it follows that when a party insured does not attain to the average age according to the Table, the insurers will either lose by him, or realise less than their ordinary profit; and when, on the other hand, the life of an insured party is prolonged beyond the tabular average, the profits of the insurers are proportionally increased. But if their business be so extensive as to enable the law of average fully to apply, what they lose by premature death will be balanced by the payments received from those whose lives are prolonged beyond the mean duration of life for the ages at which they were respectively insured; so that the profits of the society will be wholly independent of chance. *For the method of calculating these annual premiums, see post, Interest and Annuities. VOL. II.-G 10 |