Cadwalader] o^ [March 19, 



insurance was the branch of the business in which he proposed specially 

 to engage. To the preparatory study and observation of the peculiarities 

 of insurance of this kind, he devoted more than two years until 1829, 

 when, through his influence, the Franklin Fire Insurance Company was 

 incorporated. He conducted this Company's business for almost forty 

 years. 



At his death, the Company, with an entire capital of $400,000, had paid 

 five-and-a-half millions of losses, and the claims unsettled were less than 

 $24,000. The annual income was $360,000, or 90 per cent, on the capi- 

 tal. The yearly dividends for ten years had been 32 per cent. ; and the 

 assets were more than $2,600,000, — -the accrued surplus being about 

 $1,100,000. Nothing had ever been lost upon an investment ; nor was 

 there an existing investment of doubtful security. This complete success 

 of the Company was due entirely to his administration of its affairs. 



The attainment of such success, or of much greater seeming success, 

 would not have been surj)rising, or even extraordinary, if there had, in 

 the meantime, been a corresponding hazard of proportional heavy losses. 

 But such hazard had not been incurred. At the outset, serious diflicul- 

 ties were indeed encountered in pi-omoting the extension of the new 

 Company's business without assuming an undue proportion of extra- 

 hazardous risks. Of risks of small amount in Philadelphia, most of the 

 less hazardous were taken by two or three mutual insurance Companies 

 of long established standing, which made no dividends. Competition 

 for such risks, at full premiums, could not be expected until a corres- 

 ponding surplus fund, in addition to the capital, should have been accu- 

 mulated. The division of large risks among several insurers was then 

 difficult, if not impossible, because fire insurers, .and fire insurance 

 agencies, were few, and fire insurance brokers fewer. Upon manu- 

 facturing establishments and the contents, insurances might readily have 

 been effected. But there could be no standard of premiums on such 

 risks uniformly proportional to the actual hazard, because, independently 

 of the combustibility of the subjects, and of general reasons which under 

 a legislative policy of artificial protection affect such risks, the con- 

 stantly recurring changes in the protective legislation of the United 

 States made the inducements to care of such subjects by the parties 

 insured peculiarly variable. These early difficulties were for a time 

 partly overcome by the obvious and ordinary, though often unsatis- 

 factory expedient of establishing agencies at points more or less distant. 

 The difficulties were completely overcome through the adoption of a very 

 simple plan to multiply insurances upon small risks near home.' 



The plan was to lend on first mortgages of newly constructed dwelling 

 houses of moderate dimensions, in Philadelphia and the suburbs, enough 

 money to pay the cost of the ground and the premium of a perpetual 

 insurance on the buildings, with sometimes the addition of a small portion 

 of the cost of their construction. The insiirances were, of course, made 

 by the Company's own policies. The two-fold purpose of a proper 

 insurance, and a safe investment, was thus effected in every such case. 



