Complete Works of a E W Mason

by A. E. W. Mason

  In 1720, George the First proposed that the South Sea Company should take over not merely the floating but the entire debt of England, which at that time amounted to £31,000,000. Even the staid Bank of England could stand it no longer. It came in with a proposal to take over the debt itself in the place of this upstart Company. But the upstart Company had several notable people behind it, amongst them the famous — or shall we say infamous? — Countess Von Platen; and the South Sea Company carried the day against the Bank of England. The shares jumped from 130 to 300. The King’s proposal was debated for two months in the House of Commons and for forty-eight hours in the House of Lords, and on April 7th of that year the Bill became law.

  Strangely enough, the South Sea Stock immediately fell. The Directors asked for a million more capital, offering £300 for £100. They got it, and they got more. Before Midsummer, the stock had risen to 800 per cent. The satirists, as you can imagine, got to work, but what did they matter? Satire, from the days of Aristophanes, has never stopped a rush. It will hold up this or that person, this or that group of people, to the ridicule of future generations, but it has no check upon them while they live. Neither Juvenal nor Molière deterred. The “Precieuses Ridicules” died not of satire but of their own inanition. The satirist and his fellows might rave as they liked against Change Alley and the South Seas but not one sedan chair dropped out of the crowd in consequence.

  It was not everybody, however, who was able to get near enough, or, if he did get near enough, to purchase the coveted stock. Other companies, therefore, with other projects no more unreasonable, sprang up in the same neighbourhood. The advertised capital of these companies ran, as a rule, into millions. And why not? The public was gullible. It was a matter of prestige — of the appeal rather than of actual cash. The nominal capital of the various undertakings floated during the years when the South Sea Company was at its zenith amounted to five times the entire currency of England and Europe. No one asked any questions — all were too anxious to buy.

  Here are a few of the proposals: a scheme for furnishing funerals to any part of Great Britain; another for making looking glasses and coach glasses, with a capital of £2,000,000; a third for the transmutation of quicksilver into malleable fine metal; a fourth for ensuring and increasing children’s fortunes; a fifth for building and rebuilding houses throughout all England, with a capital of £3,000,000 (this, by the way, is a scheme which might have a chance to-day). Yet a further philanthropic set of gentlemen floated a scheme for supplying the town of Deal with fresh water. Another set, this time more ingenious than philanthropic, proposed to make deal boards out of sawdust. And all these schemes obtained their votaries. The cry went up “Give us something to buy,” and the response was not inadequate.

  Two schemes stand out especially through the grandeur of their simplicity. The longer one lives, the more clearly it is proved to one that the old and simple dodges never fail. If you want to practice that amiable form of robbery known as the confidence trick, be sure to practice it in its most primaeval form. An old man named Le Brun knew the ropes. He had been suitably educated, for as a boy he had sailed with Sir Henry Morgan when Morgan devastated Panama. He had been with Patterson in Darien. He had owned a privateer himself in the days when a privateer was a polite name for a pirate, but like the men of his class he had lived like a fighting cock when he had the money, and in his old age he was poor. The fame of Law in Paris attracted him over the Channel. The fame of the South Sea Company and the doings in Change Alley brought him hot-foot back again. He was, as it were, in his own country. He set out a wonderful project. You had only to possess £5 to reap the full benefit of it. He had an office in Change Alley. It was called simply, broadly, sympathetically—” Office of Insurance and Annuity for Everybody.”

  “Anybody,” Mr. Le Brun announced, “who paid him five pounds was to be assured of receiving a life income of £100 per annum, as soon as a sufficient number had subscribed!” A great number subscribed — but not a sufficient number. The number had to be ever so great before Mr. Le Brun could be able to put his wonderful scheme into operation.

  A still simpler device was imagined by a gentleman whose name (alas!) is not known. He propounded a company for carrying on an undertaking of great advantage, “but nobody to know what it is.” The capital of this singular undertaking was to be a mere fleabite — half a million pounds in five thousand £100 shares. But — and here the anonymous benefactor showed his discretion — you had only to deposit £2 a share and you obtained by the mere fact of that deposit £100 a year on each share. This worthy person opened his office in the morning. By the time business in Change Alley ceased and the ladies and gentlemen retired to the lighted candles of the West End, he had secured deposits to the tune of £2,000. The next morning the office was closed and it was never opened again. These schemes were iridescent as the mayfly, and had just as long a life. They sparkled and glinted in the sunlight through a day, and the next morning they were not.

  After the shares of the South Sea Company had risen to 800 per cent., a good many prudent people began to realise their fortunes, and stocks accordingly fell. The Directors asked for more money, obtained it, and the shares in August had risen to no less than a thousand per cent. But the end was near, and in the month of September the Bubble burst. A member of Parliament of that day wrote to Lord Chancellor Middleton: “The consternation is inexpressible, the rage beyond description, and the case altogether so desperate that I do not see any plan or scheme so much as thought of for averting the blow, so that I cannot pretend to guess what is next to be done.” The Bank of England made an effort. It asked for a subscription of three million pounds for the restoration of credit, but did not get it. The South Sea Stock fell to 135, and bankers and goldsmiths who had lent money on South Sea Bonds were compelled to fly the country. Parliament was summoned to meet, and George the First returned post haste from Hanover. An enquiry was instituted into the management of the Company and a series of frauds was discovered in which members of the Government were shamefully involved. Mr. Secretary Craggs and Mr. Aislabie, the Chancellor of the Exchequer, went down with a crash. People did not exact from the Ministers of the Crown in those days the same high standard of propriety which is demanded to-day. But the scandal in this case was too great for extenuation. Aislabie went to prison, and bonfires were lighted in the London streets on the day he was sent there. Mr. Secretary Craggs no doubt would have gone on the same road but his son, for whose sake, it was currently said, he had amassed a million and a half out of the Bubble, died suddenly, and the father was stricken with apoplexy. The Countess Von Platen, with her two nieces, was proved to have been given £20,000 worth of fictitious stock as an inducement to her to use her influence to push the Bill through Parliament. There were reasons why action could not be taken against her. The curious may turn to Thackeray’s wonderful picture of the Court of Hanover in the “Four Georges,” where he will be rewarded by one of the most startling and dramatic stories which history has ever had to tell.

  In the midst of these times, inauspicious for solid business proposals, if ever times were, the Royal Exchange Assurance Corporation was born. A Mr. Case Billingsley, of the firm of Bradley and Billingsley, Solicitors, himself a member of the Mercers’ Company, proposed a scheme for marine insurance, and gave to it the title of the “Public Assurance Office.” He opened a list at the Mercers’ Hall on the 12th August, 1717, and asked for a subscription of £1,250,000, of which £100,000 was to be paid up. The list was closed in January of the following year. But during the months when the list was open, the proposer of a rival scheme, Sir John Williams, amalgamated with him. The list being closed, Case Billingsley applied to the Attorney General for a Charter. A Charter was refused, although in this case Sir Robert Walpole supported it; Billingsley had moreover the support of Lord Onslow, a member of the Government, and of Lord Chetwynd, who was interested in a similar scheme. A good many people did not look further than the end of their noses. Lady Cowper
, the wife of Lord Chancellor Cowper, frankly wrote of both Onslow’s and Chetwynd’s proposals as “Bubbles,” and stated that they were on the same plane as the South Sea Company — frauds upon the public — no more, no less.

  Billingsley, however, and his Directors did not lie down under the refusal. They cast about and bought up for a song an old Charter of Queen Elizabeth’s time, which had nothing whatever to do with Assurance in any form. It was a Charter of the Mines Royal, Mineral and Battery Works, which in itself was an amalgamation dating back three years. Under this Charter, with its curious coat of arms of a miner working by candle light and extracting from the earth a veritable sleet of golden drops, the Billingsley Assurance Company set up to practice Marine Insurance. From the outset it is clear that the Company did a profitable business, for it declared, and so far as we know paid, a dividend in 1719.

  It did not, however, pursue its affairs without opposition. Petitions were presented against the Company by private underwriters who foresaw ruin ahead of them, on the ground that it was doing business which the Charter did not entitle it to do. It is impossible to say what might have happened to this Company had not some ingenious mind amongst its Directors recognised, or had not some hint been given by one of His Majesty’s Ministers, that King George’s Civil List was short of six hundred thousand pounds. The two Insurance Companies — that fathered by Lord Chetwynd and now known as the “London Assurance Corporation,” and the “Royal Exchange Assurance Corporation,” which was covered by the wing of Lord Onslow — proposed to make good this deficiency in return for their Charters. Accordingly in the year 1720, on May 4th, King George recommended his faithful Commons to grant the requests of these Corporations, and the Bill conceding them their Charters received the Royal Assent on June 10th. It was after the Charter was granted that the Royal Exchange Assurance Corporation took the title which it has since retained. Billingsley was, as we have said, a member of the Mercers’ Company. He had established the offices of the Corporation in the Royal Exchange, and no name could have been more suitable.

  But it is to be observed that this was the year during which the South Sea Bubble swelled and burst. The Royal Exchange Assurance Corporation failed to fulfil the conditions of its Charter almost as soon as it had received it. The Corporation was organised on a sound financial basis, for in 1720, it had a surplus of £14,000 odd, after all obligations had been discharged. But it owned stock in the South Sea Company, and when that Company crumbled and all credit was shaken to its foundations, the Royal Exchange Assurance Corporation passed through a troublous time. It declared a dividend, but it could not pay it, and by September of that year it was short of two instalments of £50,000 each, which it owed to the Civil List. A subsequent Act of Parliament, however, relieved the Royal Exchange Assurance Corporation and the London Assurance Corporation of their liabilities in this direction, after they had paid between them something like a quarter of a million. The subsequent history of the Royal Exchange Assurance has been one of sound business and consequent prosperity. It began with Marine insurance and in 1721 added life and fire.

  CHAPTER V.

  ON ASSURANCE.

  THE HISTORY OF assurance is not a sprightly theme. It is so hedged about with details of old ordinances, tables of mortality and specimens of fire marks, as are enough to drive the general reader into the next parish. The historians begin as a rule with the Phoenicians. And they are wise. Everybody has heard of the Phoenicians and that they were the first known traders to visit Britain from overseas. You can safely assert that the Phoenicians practised marine insurance; and on the other hand, you can equally safely deny that they knew anything about assurance at all for there is no one to contradict you. There is no evidence of any kind.

  This, however, is certain. Marine assurance was the first form of assurance practised amongst men; and, inevitably, the first form. For the risk was evident and above all could be estimated with accuracy. The value of the ship and the worth of its cargo were known, and a fair reckoning could be made of the perils which were likely to be encountered on the voyage. Probably the very first edict concerning this practice was issued when Justinian was Emperor, in the year 533. He limited the legal rate of interest to six per cent, in all cases except that of “Fœnus Nauticum”; and “Foenus Nauticum” was that early form of marine assurance which we know by the name of Bottomry. In this one case, interest was allowed to be exacted at the rate of twelve per cent.

  Upon the heels of Justinian, however, followed the Middle Ages, and they wiped out Justinian’s edict and any arrangement of a similar nature, which was to be found in any parts over which the Church ruled. Interest upon the investment of capital was accounted as usury and an offence against God, to be corrected by burnings and floggings, and the other delicate persuasions of those days. We have no sure knowledge when marine insurance was revived, but we may be fairly certain that its revival was due to the far-sighted policy of the Hanseatic League, which had made its merchants the great sea-carriers of the Northern nations. The League published various sea codes during the 13th century and consolidated them at the beginning of the 14th in an authoritative pronouncement known as “The Laws of Wisby.” Wisby was a town on the western side of the Isle of Gothland in the Baltic, and at that time one of the most flourishing staple towns of the North. These Laws of Wisby do actually for the first time mention the word Bottomry, but in such a way as to make it clear that Bottomry had long been practised. Bottomry was a wager. The Underwriter bet the Shipowner that his ship with its cargo would arrive safely at its port of destination. The great difference between Bottomry and an ordinary wager, and between Bottomry and a modern form of assurance, was this: the Underwriter paid the money over at once, and, if he won — that is, if a ship arrived in safety — received his money back with the addition of the premium agreed upon. The Shipowner, in a word, held the stakes.

  This primitive form of insurance developed quickly. It became insurance as we understand it to-day. Thus in the “Chronyk Van Vlaenden” — an ancient history — it is written: —

  “On the demand of the inhabitants of Bruges, the Count of Flanders permitted in the year 1310, the establishment in this town of a Chamber of Assurance, by means of which the Merchants could insure their goods, exposed to the Risks of the Sea, or elsewhere, in paying a stipulated Percentage. But, in order that an Establishment so useful to Commerce might not be dissolved as soon as formed, he ordered the laying down of several Laws and Regulations which the Assurers as well as the Assured, are bound to observe.”

  Bruges was at this period the very capital of the commerce of the North. It was the great storehouse, the chief market and the main sea-port of that far-flung League.

  It was no uncommon thing for a hundred and fifty tall ships to enter on a single tide into Sluys, the outer harbour of Bruges.

  The first definite ordinances concerning marine insurance, however, came from a very different part of the world. The Magistrates of Barcelona, certainly on four separate occasions during the 15th Century, formulated Rules which were one and all intended to prevent the over insurance of unseaworthy ships — a growing scandal and danger of those times. The Barcelona trade was mainly with the Ports of Italy; and the Grand Council of Venice, before the century was over, followed in the footsteps of Barcelona. The Venetian Decree starts by declaring that, owing to the perverse nature of mankind, people will quarrel about money matters, and proceeds to deal with such very modern dangers as that arising from carrying an excessive cargo on deck. Ordinances issued in Venice were certain to find their way into England, for the Italians, or Lombardy men as they were called, had already gained a solid footing in England, and indeed were actually carrying commercial war into the very camp of the Stillyard.

  The attack of the German Emperor upon the Pope in the first half of the 13th Century, and the influence of the Crusades, which brought to England in Italian Fleets spices, carpets, silks and other luxuries from the East, were the chief causes of the Italian inv
asion. With the expulsion of the Jews by Edward the First, their position was greatly strengthened, for, in their turn, they became the usurers. We find the Lord Mayor, at the King’s command setting aside for them a district of London in which to reside — the district now known as Lombard Street — and so powerful did they become that even though their unpopularity made them objects of continual attacks by the populace and continual Petitions for their expulsion to successive Kings, they were only dislodged in the end by their own fears for their personal safety.

  Thus, long before any decree with regard to marine insurance was issued by a Government of England, the practice of insurance was common and regular in the country. The first British Marine Insurance Act bears the date of 1601, and states in its Preamble’ that Marine Insurance has been “tyme out of mynde an usuage amongste merchantes, both of this realme and of forraine nacyons.” It mentions, in fact, “an Office of Insurance within the City of London,” where a registry of marine insurance policies was compiled. This Act of Queen Elizabeth established a permanent commission for the hearing of cases arising out of policies of marine insurance. The Commission was to sit for the time being under the presidency of the Judge of the Admiralty and the Recorder of London. It was to consist of two members of Civil Law, two common lawyers and eight grave and discreet merchants, and was to hold its Sessions once a week.

  The Act, however, found no favour with the Merchants of the City of London, chiefly, no doubt, because it allowed appeals to the Court of Chancery, which in the slowness of its procedure seems in those days not to have lagged behind the Court of Chancery, as Dickens found it in the days of “Jarndyce versus Jarndyce.” The Act accordingly fell, after a generation, into disuse. But the practice of assurance steadily increased and, with the coming of Lloyds and the granting of the Charters to the two great Corporations — the Royal Exchange Assurance and the London Assurance — was gradually placed upon a legal and scientific basis.