558 



AMERICAN FORESTRY 



is shown in an article by Professor Lovejoy, of the Uni- 

 versity of Michigan, in the Forestry Quarterly, that a 

 tract of timber which has been wiped out by fire cannot 

 be replaced by growing a new forest at the same cost 

 as the current stumpage value destroyed. While this 

 may be true in his premise of 100-year-crop rotation basis 

 in forest replacement, it is also true that there is still 

 remaining in America opportunity to purchase additional 

 area at approximately the same stumpage price. While it 

 is true that insurance of the timber would eat up a con- 

 siderable percentage of the growth value ( as over-assessed 

 taxes do at present), insurance would, on the other hand, 

 help the plantation and reproduction of trees, in bringing 

 the expectation value of the crop from the future down 

 to the present, and would insure careful superintendence 

 and continuance of protection. Such protection would 

 make certain both profit from growth, and what is of 

 more moment, the increased value of stumpage. Such 

 insurance is practically collecting the present worth of 

 expectation value and commencing a new period of crop 

 rotation. P'rofessor Lovejoy, by proving how slight a 

 yearly loss by fire to uninsured forest property will over a 

 hundred-year period wipe out the profit of growth, 

 proved the necessity of efficient fire protection, and how 

 financially possible and advisable it is to expend yearly 

 even a much greater amount per acre than is now com- 

 monly done. P>y the same argument, he also proved the 

 advisability of insurance, as even the best of fire pro- 

 tective measures must necessarily stop short of com- 

 plete protection ; lightning will continue to strike ; fires 

 will continue to be set from unknown causes ; and here 

 and there a forest fire is inevitable ; so that a wise man 

 with a small valuable tract of timber in an exposed posi- 

 tion will seek insurance in order that this irreducible 

 minimum of hazard should be forecast and adequate pro- 

 visions prepared to meet it. 



The moral hazard in the insurance should be reduced 

 by the co-insurance of members, indemifity to be limited 

 to 80 per cent of the valuation. Reinsurance may possibly 

 be worked out after the inter-insurance principles have 

 been proved sound. 



Inter-insurance would be of the greatest immediate 

 value to the small owner or farmer whose tract is small, 

 exposed and subject to total loss, as large owners with 

 largely distributed risks practically insure themselves. If 

 large owners will, however, join with the small ones, 

 contributing each a small area, then when the association 

 has proved a success by adding new members and in- 

 creased territory, with its result of more uniform loss, 

 greater reserve and lower premium, opportunity may be 

 created for the carrying of a large line of insurance on 

 the larger and more valuable tracts. The small and well- 

 distributed risks at the start are more equitable amongst 

 owners, as a more perfect classification of hazard and 

 value can be arrived at and risks amongst owners can 

 be equalized. 



An initial guarantee fund is necessary to create an 

 immediate reserve until such time as the surplus of 

 premiums form such a reserve. This should be prefer- 



ably a cash deposit. As most land owners are long on 

 land and short of cash, however, to start the association 

 and tide over the first two or three years, title to a small 

 tract of merchantable standing timber could be trans- 

 ferred as a guarantee and accepted as security by the 

 association, and returned when the excess premiums had 

 become suHicient. Subscribers should be bound onl\- to 

 the close of each season and to the extent of their original 

 guarantee, and could withdraw at any time, except in as 

 far as they were bound to make good the losses and costs 

 of management of that particular year. ]\Ianagement 

 should be vested in a Ijoartl of directors of five and the 

 managing attorney-in-fact, who legally would be the 

 agent of each of the subscribers, and to his judgment they 

 would have to trust the initial complex questions of the 

 relative hazard, acceptability of tracts, valuation, and pro- 

 tection required, in order that all might be put on ap- 

 proximately the same initial basis. 



New England should be selected as the region to 

 inaugurate such an association, as it is the most uniform 

 in climate, and shows the most uniform statistics, and a 

 more economic management and inspection could be 

 effected if subscribers were not too extended. The man- 

 aging attorney-in-fact should preferably be a trained 

 forester with experience, judgment and ability. Classi- 

 fication of risks would call for consideration of the kind 

 and character of species, exposure, soils, neighboring 

 risks, accessibility to market, market values, climatic, 

 phvsical and moral hazard, and many others, and such an 

 association should start in a small way, proceed with 

 great conservatism, and ask for cooperation and support 

 for a considerable period, in order that a new and desir- 

 able opportunity be opened to the timber owner every- 

 where for the protection of his property and the encour- 

 agement of long-time management. Such an association 

 would create a new profession, that of timber actuary. 

 It would gather adequate data concerning fire risk. It 

 would create a more definite market for cutover land and 

 second growth. It would stimulate planting. It would 

 encourage long-time management of lands and demand 

 for adequate protection. Financially, if loans could be 

 secured on insured standing timber for a portion of its 

 value, as is done on other forms of property, and such 

 released capital could be put at work for the owner, it 

 is not imreasonable to suppose that it might earn enough 

 more above bank interest to pay the cost of the insurance 

 on the whole tract. Finally, standing timber insurance 

 would assist in floating bond issues and increase the 

 market value thereof. 



HAVE YOU SECURED A NEW MEMBER? 



We desire 5,000 new members before January 

 I, 191 7. We ask each member to secure Just One. 

 Will you do it now? 



