Standing Timber Insurance 



By W. R. Brown 



UNTIL recently there has been little or no insurance 

 offered on standing timber in the United States 

 and no formulated opinion on the subject. Lloyds 

 of London, the first company known to have offered stand- 

 ing timber insurance in Canada, placed it on excess loss 

 over a given amount on separate limited tracts, or, in 

 other words, the owner was the initial co-insurer, to a 

 large extent, on his own land, Lloyds merely taking the 

 additional risk over and above a stated amount on various 

 restricted areas. The Phoenix Assurance Company of 

 London, in their Pacific Coast Department, this year is 

 offering a limited line on green standing fir, spruce, cedar 

 and pine timber in Oregon and Washington, west of the 

 summit of the Cascade Mountains, on prearranged stump- 

 age value, to owners at from to 1 to V/2 per cent, and 

 to bond holders at from y 2 to }i per cent, over a full 

 season. Such timber must be accessible to market, not 

 unduly exposed, and only one risk is taken in certain 

 zones or fire areas established by the company. No risk 

 greater than $17,500 is written in any one fire area. The 

 rate of V/z per cent is made up of 54 of 1 per cent for 

 the wet, and 1'4 per cent for the dry season, for which 

 part no return premium is payable, and it is interesting to 

 note that Z2>)/s per cent is taken off of all premiums for 

 approved patrol. 



Formerly, when old line insurance companies were 

 approached for standing timber insurance, they invariably 

 shook their heads and mentioned the great amount of 

 capital tied up in timber, the vast reserves necessary to 

 cover such values, the danger of a general conflagration, 

 the inevitable dry season, and quoted from some exag- 

 gerated newspaper report, and stated that in their judg- 

 ment such insurance would be hazardous in the extreme 

 and require an unreasonable rate. On the other hand, 

 timl>er bonding houses and large owners, who had gone 

 many years without suffering serious loss, asserted there 

 was no unreasonable danger, provided the tracts were 

 well scattered and of sufficient extent, and large bodies of 

 timber insured themselves. Small owners instituted as 

 much protection as possible and took their chances of 

 complete loss. 



No accurate data existed as to the location, extent and 

 damage done by fire, and almost *no organized protection 

 existed. Meanwhile estimates made by newspaper re- 

 porters were taken in the popular mind as actual facts. 

 To meet these conditions, the United States Forestry 

 Department in 1905 commenced the scientific administra- 

 tion of public lands and included adequate fire protection 

 and the gathering of statistics. State forestry depart- 

 ments followed its lead, and private fire protection asso- 

 ciations sprang up. the first organized in the Pacific 

 Northwest six years ago. and thirty or more elsewhere 

 throughout the t'nion. Railroad cooperation was se- 

 SM 



cured. Protective laws were passed and enforced. A 

 campaign of public education was carried on and field 

 methods improved. Accurate statistics were gathered as 

 to the causes of fires and at what points they were liable 

 to occur, what proportion of the values was being con- 

 sumed each year, and how fires could be minimized and, 

 in a measure, foreseen and anticipated. The compilation 

 of this data has led the writer to believe that the present 

 hiss by fire in standing timber is apparently not any 

 greater than that in other forms of property, and that 

 insurance in some instances is desirable on standing 

 timber, and that an inter-insurance association among 

 owners can now be formed and be both economical, 

 successful and beneficial. 



Without going too much into the dry details, the writer 

 will sketch his reasons for his opinion that timber is 

 insurable and the principles on which such inter-insurance 

 association should be founded : 



First, there is at hand five years of fairly accurate 

 data collected by the agencies above, which show, on an 

 average, a loss in value of less than l / 2 of 1 per cent and 

 this average loss through increased protection is con- 

 stantly diminishing. For the twelve western private 

 forest protection associations, amalgamated under the 

 management of Mr. E. T. Allen, and which cover an 

 area of twenty-two million acres, there has been spent 

 yearly about $200,000, or nine-tenths of a cent per acre 

 per year, and as to the average annual loss I will quote 

 from a letter received from Mr. Allen : 



" I have your inquiry of April 25th. About all I can 

 do is to compute the feet of merchantable timber de- 

 stroyed, with a very rough estimate of the total stand 

 under protection, which in percentage would apply about 

 equally well to values. This gives us in 1910 a loss of J4 

 of 1 per cent; in 1911, Vi. of 1 per cent; in 1912, 

 V 166 of 1 per cent; in 1913, Vioooo of 1 per cent; in 

 1914, Vo to V,, of 1 per cent; and in 1915, 1 / tl0 of 

 1 per cent. . . . Nobody knows, of course, but we should 

 guess that (as 1914 was as bad a year as 1910 in hazard, 

 and improvement of methods got us through with a 

 tenth of one per cent loss), it is pretty safe to say that 

 (as a year five times as hazardous is almost inconceiv- 

 able), we shall never equal half of one per cent again 

 unless war or some other disaster destroys our protective 

 system itself." 



The New Hampshire Timberland Owners' Associa- 

 tion, with a million acres on which they spend one cent 

 per acre per year, sustained a loss in 1911 of J4 of 1 

 per cent; in 1912 of % of 1 per cent; in 1913 of 7 

 of 1 per cent; in 1914 of V 10 of 1 per cent; and in 

 1915 of V, of 1 per cent. The Northern Fire Pro- 

 tective Association of Michigan, with an area of two 

 million acres, on which they spend 1 cent per acre per 



