ON THE NATURE OF INSURANCE. 257 



precede, those of the market, there is good ground for 

 imagining that the diminution of the rate of interest 

 between borrower and lender (from 10 to 4 per cent.) 

 has arisen more from the increase of security than 

 from any other cause. If such be the case, there is 

 strong presumption that the fall is near its end. But, 

 if the preceding surmise should not be well founded, 

 and if (as was the case in Holland during a part of the 

 last century) the rate of interest should fall until go- 

 vernment can borrow at 2 per cent., and others at 3 per 

 cent., the change may happen in a manner which will 

 seriously affect the insurance offices, unless it should 

 come about so gradually that they will have time to 

 introduce new premiums for incomers, and surplus to 

 meet the claims of those to whom they are already 

 engaged. It is, in the meanwhile, a question well 

 worth the attention of those connected with them, what 

 the causes have been which have determined the rate of 

 interest, and the rapidity and amount of its variations. 



The offices depend for the existence of their present 

 system upon the national debt ; and they are differently 

 situated from the government which owes the debt, in 

 that the engagements of the latter are all maxima, 

 while theirs are minima. If the rate of interest should 

 really fall, the government will have the means of 

 reducing the interest of the debt, never to rise again ; 

 while the offices have, in fact, guaranteed to their ex- 

 isting customers a rate per cent., which is never to fall 

 during their lives. The rate assumed by the offices 

 should, therefore, never be above that at which the 

 government can borrow. 



With respect to the second reason for a variation in 

 the rate of interest, as experienced by the office, namely, 

 a depreciation in its own property, such an establish- 

 ment, not being allowed to run the usual risks of 

 mercantile life, should not deal in any but the most 

 secure investments, and those which depend on the 

 personal security of others should be altogether avoided. 

 The only point which it is incumbent to mention, in 

 s 



