termination of the insurance activities, together with the $17,500,000 representing the excess of premiums received over losses paid. While the 1914 act did not originally provide for a revolving fund, it was later found necessary to establish such a fund.

For the purpose of roughly estimating the need for substantial reserves, a comparison of the possible maximum operations under the law, with the total risks insured by the Bureau of War Risk Insurance under the 1914 act, may be useful. It should be borne in mind that the above estimates for the needed reserves are based upon reasonable probable losses to be met at any given time. The net insurance written under the 1914 act was slightly over $2,000,000,000, and the net seamen's insurance was approximately $320,000,000 (see 1920 Report of the Secretary of the Treasury). On July 1, 1918, the net amount at risk was approximately $115,000,000, and the net on seamen's risks at that time was approximately $6,400,000 (see 1919 Report).

On May 15, 1940, there were approximately 1,000 American seagoing vessels (excluding vessels on the Great Lakes and Governmentowned vessels) of about six and three-quarter millions gross tons in the foreign and domestic trade of the United States. Roughly, the maximum insurance on the hulls may be figured on the basis of $70 per gross ton, cargoes at an average of $1,000,000, and the number of the crew on the vessel at 40 men. This would give a possible maximum insurable risk of approximately $470,000,000 for hulls, $1,000,000,000 for cargo, and $100,000,000 for seamen. Of this total possible maximum risk of $1,570,000,000, the portion to be insured at any time by the Commission necessarily will depend on the extent of operations of these vessels in areas where war-risk insurance is carried, and the extent to which private commercial facilities are inadequate to carry the risks in the event of the unavailability or undesirability of world insurance protection, on the fluctuations in cargo values, and on the extent of voyages of these vessels.

In connection with the amount of the required fund, I must emphasize that the need is likely to be a sudden and rapidly increasing one. If the world insurance market becomes unavailable or undesirable for American shipping, the need for Government support of the American market is likely to arise overnight. There will be no time to make the necessary adjustments on the part of private facilities, and if commerce is to be kept moving there must be immediately available sufficient insurance protection from the Government as provided in this legislation. Thus the need for the insurance protection may arise very suddenly and will require protection in large amounts. The volume of exports and imports now being carried in American bottoms is much greater than in 1914. At that time only 12 percent of our commerce was transported in American vessels. Prior to the outbreak of the present war, this percentage had increased to 35 percent. It must also be borne in mind that the Commission will be called upon to supply insurance for the very highly valued vessels and cargoes, and at the same time may not have a premium income from the smaller risks because these will be insured by the commercial underwriters. This requires that even more substantial reserves be maintained.

The Commission, under the Merchant Marine Act, 1920, has authority and writes both marine and war-risk insurance on vessels in which

it has an interest, and it has available personnel and experience which can be quickly put into use in meeting the needs of American shipping under this legislation. The Bureau of War Risk Insurance, which administered the 1914 act, was established for that purpose.

ADMINISTRATIVE EXPENSES

The proposed appropriation contemplates that not to exceed $150,000 of the total appropriation shall be used for expenses of administration involved in the legislation. This will cover salaries of employees of the Commission, communication and travel expenses, purchases of supplies and stationery, printing, office equipment and its maintenance, and other miscellaneous expenses generally considered as administrative overhead. It will not include expenses incurred for outside services in the examination, investigation, and payment of claims under insurance issued pursuant to the legislation. These expenses are properly considered as part of the claims expense and are not to be considered as part of the overhead expense of administration. They would best be payable along with the losses paid out of the fund. Under the World War legislation, expenses of the establishment and maintenance of the Bureau of War Risk Insurance in the Treasury Department were appropriated for separately from the appropriation for payment of losses. The total appropriation for these expenses was $250,000.

MINIMUM AND MAXIMUM CARGO INSURANCE

Mr. JOHNSON of West Virginia. Do you insure along with insurance companies?

Admiral LAND. We do one or both. We might insure direct, or we might reinsure, depending upon what the market affords.

Mr. TABER. What would you figure would be the maximum amount of cargo insured on one ship?

Admiral LAND. There is a very wide variation in that figure, from a minimum, say, of $500,000 to $1,000,000 up to a possible total of $50,000,000. If you take the most valuable products at the present time, they would probably have to do with aircraft, engines or wings, and that might run as high as $50,000,000. The normal amount is around one or two million dollars, and the maximum would be $50,000,000.

Mr. TABER. You would not expect to be in on the ordinary cargoes at all?

Admiral LAND. If they are cargoes carried on American ships, somebody has to insure them.

Mr. TABER. If the insurance companies are able to carry them to a million dollars, you would not get those?

Admiral LAND. No; unless the rates ran away. This provides for rate-war prevention.

Mr. JOHNSON of West Virginia. You do not intend to go into competition with private companies?

Admiral LAND. No, sir; we do not. But if the rates ran completely away we would steady the market by taking some of this business ourselves, in order to hold it on an even keel.

VOYAGE INSURANCE PREMIUM RATES

Mr. TABER. What is the premium on most of this business?

Mr. OGDEN. For voyages on the North Atlantic, which our vessels cannot engage in at the present time, it runs about 7 percent for one cargo.

Admiral LAND. They vary from one-half to 1 percent up to 234 percent.

Mr. TABER. What would it be on the normal voyage?

Mr. OGDEN. On voyages to South America it would run about onehalf of one percent, or a little less.

Mr. TABER. What about voyages to the Far East?

Mr. OGDEN. It would be about the same.

Mr. SNYDER. Is there any difference on voyages from the west coast?
Mr. OGDEN. Not unless they went through the Mediterranean.
Mr. TABER. You do not go there any more?

Mr. OGDEN. No, sir.

Mr. TABER. Do your rates vary with the length of time that the voyage would require?

Admiral LAND. Generally; yes.

Mr. WOODRUM. Are the rates subject to change during a voyage? Admiral LAND. No; if the vessel sails within the proper time, which is generally about 10 or 12 days after the insurance goes into force, the insurance rate remains the same.

Mr. WOODRUM. Have you had any insurance on the gold ships?
Admiral LAND. That has all been placed on the market.

Mr. SNYDER. Have you insurance on the ships at Newport News that are being rehabilitated?

Admiral LAND. Not this type of insurance. This is emergency insurance.

Mr. SNYDER. They are rehabilitating about 30 or 40 ships there which have been there, I believe, since 1926.

Admiral LAND. You mean the Commission's laid-up fleet?
Mr. SNYDER. Yes.

Admiral LAND. We are reconditioning ships there, but we are not carrying any insurance there.

AMOUNT OF MARINE INSURANCE CARRIED BY LLOYD'S ON AMERICAN

VESSELS

Mr. WOODRUM. Do you have any figures on the volume of marine insurance written in the United States, and the volume abroad?

Admiral LAND. Mr. Ogden can give you all the data we have on that.

Mr. OGDEN. I can give it to you in percentages. Approximately 50 percent of all insurance on vessels is placed in England, and about 25 percent of the insurance on cargo. As to volume, it is hard to give any figures.

Mr. WOODRUM. You are speaking only of American vessels?

Mr. OGDEN. Yes; the total amount insured would be pretty hard to estimate. We have some rough figures in the report showing that the total amount of insurance on American vessels runs about half a billion dollars.

Mr. WOODRUM. Why is there such a large percentage of it carried in London?

Admiral LAND. It has always been so. Lloyds has been the standard insurance market of the world since any of us can remember. We have had great difficulty in building up an American insurance market over a long period of years. But recently, thinks to Mr. Ogden, we have increased the American market about 50 percent. So far as world insurance is concerned, I suppose Lloyd's has been the outstanding concern. Lloyds has done one very important thing. They have deposited in the United States a trust fund of about 45 million dollars and put it here, to take care of the insurance that Americans have with Lloyds. That is a guarantee that you will get your money. So we feel quite as confident as to Lloyds under present conditions as under normal conditions.

Mr. JOHNSON of West Virginia. Can they remove that money at will?

Admiral LAND. No; that is here, more or less as a trust fund. Mr. LUDLOW. Who has that?

Admiral LAND. The City Bank Farmers' Trust Co. of New York. Mr. WOODRUM. Can Lloyds write insurance cheaper than you can? Admiral LAND. Yes; they average about 10 percent, and their overhead is small.

Mr. WOODRUM. They are experienced.

Admiral LAND. Yes; much more than anybody else.

Mr. TABER. The premiums that Lloyds collect are added to the fund that Lloyds has here?

Admiral LAND. The American fund.

Mr. JOHNSON of West Virginia. Do those premiums remain in this country?

Admiral LAND. Yes; the American premiums remain here with this indentured trust.

NEED FOR AMOUNT OF FUNDS REQUESTED

Mr. TABER. Do you really need as much money as $50,000,000? Admiral LAND. The amount we are asking for is extremely small, in view of the amount we might have to insure. We are not using this money; it is merely earmarked as a revolving fund, and such premiums as are paid are added to it, and if we go by the experience in the last war we would not need it because we actually made money at that time. But I cannot answer your question because I do not know what is going to happen. This is done as a safeguard.

Mr. JOHNSON of West Virginia. If you do not need it you will not use it?

Admiral LAND. No; we will not. We made the amount as modest. as possible in the hope that we will not need very much of it. On the other hand, if we get into a world conflagration, in my opinion, and as I think you can visualize it, this would not be anything like enough. If it is not we will come back and tell you the story.

Mr. TABER. If we have no more American ship losses in the next 6 months than we have had in the last 6 months, the premiums would more than take care of those operations.

Admiral LAND. That is correct.

Mr. WOODRUM. Have you applications for insurance?

Admiral LAND. Yes; we have ships that we ought to insure right now. Take the new America, for instance. Nobody knows what we are going to do with the America. We may send her out under the direction of the State Department, or under the direction of the administration or under our own direction, or under the direction of the United States Lines, on some voyage, I cannot tell you where. But we must insure the ships; it would be stupid not to do so. We presumably will not send her where there is any unusual risk.

Mr. WIGGLESWORTH. How much money is available now?
Admiral LAND. We have nothing in the fund now.

Mr. WIGGLESWORTH. Is there not an excess of premiums over losses? Admiral LAND. We have an insurance fund of our own in which we are permitted to insure our mortgage interest in our vessels, under the act of 1920.

Mr. WIGGLESWORTH. What is the total available for that purpose? Admiral LAND. I can give it to you, but I do not know what it is, offhand. But that has not anything to do with this. That is independent action authorized by Congress in the 1920 act, covering our mortgage investment in these ships.

NUMBER OF MARITIME COMMISSION VESSELS NOT COVERED BY PRIVATE INSURANCE COMPANIES

Mr. WOODRUM. How many vessels has the Maritime Commission that private insurance companies will not cover?

Admiral LAND. We have about 15, and we are going to have more as ships come into commission. There are 15 ships they could not possibly cover now. I have a list of those.

Mr. WOODRUM. Will you put that in the record?

NUMBER OF ADDITIONAL ADMINISTRATIVE PERSONNEL REQUESTED

Mr. WOODRUM. This will require the setting up of a division with additional personnel?

Admiral LAND. Some small additional personnel in Mr. Ogden's division. We think the maximum administrative expense would not exceed $150,000.

Mr. WOODRUM. Have you a break-down of the personnel!

Mr. OGDEN. We have made up a list which is largely clerical personnel.

Mr. WOODRUM. Will you put that in the record.
Mr. OGDEN. Yes, sir.