In this connection it should be said that we would favor, as a matter of principle, having the insurance companies take over the entire program of war-damage insurance if it were feasible, if they were disposed to do it, and if they had the resources to see it through. But we are dealing with extraordinary risks which conceivably could tax the resources of the Government itself. So, we see no alternative. But the point should be recognized, and in all respects preserved, of keeping the war damage indemnity within the present exclusions of commercial policies.

4. Such insurance should be provided at the cost of the insured. There is no other equitable basis. But it does not follow that it should be borne exclusively, or even mainly, by the owners of properties considered most vulnerable to damage and destruction, as, for example, those in production centers which might offer a first object of attack. For one thing, it is quite impossible to measure the relative "exposure" of different locations. There can be no monopoly of hazard in modern warfare. But, in a larger sense, the potential loss in as obligation which attaches to all property and in which all should share, just as the cost of replacing a battleship or, for that matter, the general cost of prosecuting warfare is the responsibility of all citizens.

This being so, the obvious goal to be sought, for the greatest benefit to the greatest number, is the widest possible distribution of insurance protection. This can be encouraged in various ways, the most logical and acceptable of which leads inevitably to our next point.

5. The cost of such insurance should be as reasonable as the circumstances permit, and there should be no desire, or intent of the Government to make a profit. We feel that a declaration of such policy should be incorporated in the act itself; that there may be no mistake about it, for at some later stage a contrary interpretation is not precluded.

Granting that at this date no one can appraise the extent of possible losses, and that any basis of compensation must be developed by the trial-and-error method, it should be the consistent purpose to avoid excessive charges if for no other reason than to promote general and prompt acceptance.

6. Should the operation of the war-damage insurance program actually result in a profit, as happened under similar though hardly comparable circumstances during World War II, this would be prima facie evidence that the charge to the insured had in fact been excessive, and it would be only proper and fair to provide for a refund to policyholders on some equitable basis, to the extent of such excess. This would undoubtedly prove to be a laborious and expensive task; by far the better way would be to establish administrative procedures that will relate cost to experience as developments warrant or demand. Certain suggestions which follow will have further bearing on this point.

7. We are aware that much consideration has been given to the question whether war-damage insurance should be voluntary, just as ordinary insurance is voluntary. In principle, all should favor the voluntary method; for the average American still holds to the doctrine of free choice in a free country. But other phases of the war effort are compulsory, and have been accepted, thus making a virtue of necessity. The practical reason for favoring the voluntary system— granting that general coverage will prove most equitable in the ulti

mate result is that any other plan that has been advocated would be difficult to enforce. The practical reason for favoring a compulsory form of insurance is that, with broad coverage and assumption of cost, the initial expense can be greatly reduced, as well as the ultimate charge for such insurance.

One manifest defect in our previous experience was lack of general distribution. The net result was that those who ignored the wardamage program fared far better than those who "went along." All this was confusing and gave rise to complaint. Such dissatisfaction may not have been well founded, but nevertheless prevailed.

8. The difficulties that were encountered in our previous voluntary experiment could be avoided if a more general coverage were assured. In this connection one of our federated associations, which has given a great deal of study to insurance matters as they affect our business, and to war-damage insurance in particular, has advanced the suggestion that the cost of war damage insurance be financed by a Federal excise tax on fire-insurance premiums, providing automatic coverage in like amount. We pass this on to your committee as an interesting proposal, worthy of careful consideration.

Under this plan, the sharing of the cost by most of the cities of the country could be accomplished by levying a small excise tax on the premiums of all building and personal-property fire insurance written by companies doing business in the United States and its Territories. There would be given to those insured under such policies war-damage insurance coverage in the same amount as the fire insurance and affording protection for the same insured property. To provide war-damage insurance protection for individuals and corporations who are self-insurers against loss or damage by fire, and to provide excess coverage for individuals and corporations desiring protection greater in amount than their fire insurance coverage, the Government should make such insurance available on a voluntary basis. Undoubtedly the railroads, steel companies, and other large companies, who are now self-insurers, would want war-damage protection in view of their vulnerability, thus spreading the coverage and assumption of cost over the entire country.

We are aware that treating this charge as an excise tax presents certain complications in that taxation must originate in the Ways and Means Committee of the House of Representatives, but that suggests no impairment of the method proposed. We do not know that such a plan has been previously considered and feel that it merits your attention.

9. In any case, the charge for the first year's insurance should be no more than to create a reasonable reserve unless grave changes in the international picture intervene prior to the date of administration. Policies should be written for terms limited to 1 year, the rate for subsequent years being gaged by loss and cost experience. Thus will be accomplished a conservative approach, with an initial charge and subsequent program acceptable to all participants. By "pooling" all proceeds with attendant costs, future contributions can be kept in realistic relation to requirements.

In conclusion, we submit that the Congress of the United States should make the earliest possible provision for insurance against war losses. Such insurance should be provided at the cost of the insured

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at as reasonable a rate as circumstances permit without profit to the Government, adopting such means as it finds most promising and effective to encourage and assure the widest possible participation by all owners of insurable property.

I thank you.

Senator FREAR. Thank you, Mr. Cook.

Do you have any questions?

Senator SCHOEPPEL. Mr. Cook.

Mr. Cook. Yes, sir.

Senator SCHOEPPEL. I want to confess at the outset this is probably the most confusing and most technical field that we could move into. I share with you, and I am sure others who appear before this committee, the feeling that, whatever we do, we should first tie in to some sound financial approach that can meet the objectives that we seek to accomplish.

Mr. Cook. Yes, sir.

Senator SCHOEPPEL. I am wondering if the question here, and throughout this entire series of hearings, will not focus itself upon what actually is an insurable risk and how far we can go to determine those things and set up the proper insurable safety amounts.

If I understand your testimony, you advocate the Government handing this over to the private companies?

Mr. Cook. What I have proposed here, Senator, is that the Government would have to, in one manner or another, underwrite the project. When I say "underwrite" it, you will notice from my testimony that we are proposing that in the long run the United States Government pays no cost of the insurance. We think the beneficiary should do so, but we do feel it will be necessary because of the enormity of the possible losses-as the chairman has pointed out, there is 400 billion or more dollars' worth of real property alone in this countrythat only the United States Government could actually underwrite the project.

We feel that the insurance companies through their facilities could render the services necessary to handle the actual mechanics of the project.

Now, you understand, and I repeat, that I am a building manager, not an insurance man. Our association looks at this project from the standpoint of the need of the owner of real property, and perhaps some of my answers may not sound technically correct because I in no way handle insurance. The only way I deal with insurance is as a purchaser for other owners of property.

Senator SCHOEPPEL. Have you and your group studied the possibility of your private insurance companies doing the job? Have you given any study to that? Have you prepared anything that we might submit to the committee for study as we approach the final approval of some of these measures?

Mr. Cook. It is our belief the private companies would be financially unable to accept this responsibility because the possible damage is so great that it is inconceivable that the private companies could do that according to our amateur understanding, again I repeat, of the condition of the insurance companies.

Senator SCHOEPPEL. I rather gathered that some additional witnesses who will be before us will go into certain phases of that more

in detail. I certainly would like to have some light on that. That is one reason why I wanted to have, if you had some suggestion, some pertinent studies that you might give us the benefit of, to have for future reference of the members of the committee.

Senator FREAR. Senator Dirksen.

Senator DIRKSEN. I have no questions. Thank you.

Senator FREAR. I am sure all the people in this room recognized Senator Ferguson when he came in the room, the author of S. 114. Thank you very much, Mr. Cook.

Mr. Cook. Thank you, sir.

Senator FREAR. The next witness is Mr. Herbert P. Stellwagen, executive vice president of the Indemnity Insurance Co. of North America, on behalf of the Association of Casualty and Surety Companies.

Mr. STELLWAGEN. Good morning, sir. Senator FREAR. Good morning, sir. Glad to have you with us. You may proceed in your own manner, sir.

STATEMENT OF HERBERT P. STELLWAGEN, REPRESENTING THE ASSOCIATION OF CASUALTY AND SURETY COMPANIES

Mr. STELLWAGEN. My name is Herbert P. Stellwagen, and I am executive vice president of the Indemnity Insurance Co. of North America. My address is 1600 Arch Street, Philadelphia, Pa. I am appearing in behalf of the Association of Casualty and Surety Companies, a voluntary nonprofit organization composed of 84 capitalstock insurance companies writing various forms of casualty insurance, including workmen's compensation insurance. A list of the companies constituting the association membership is submitted. (The list of companies referred to follows:)

ASSOCIATION OF CASUALTY AND SURETY COMPANIES, 60 JOHN STREET, NEW YORK, N. Y.

MEMBERSHIP LIST

Aetna Casualty & Surety Co., Hartford, Conn.

American Bonding Co. of Baltimore, Baltimore, Md.

American Casualty Co., Reading, Pa.

American Credit Indemnity Co. of New York, Baltimore, Md.

American Employers' Insurance Co., Boston, Mass.

American Guarantee and Liability Insurance Co., Chicago, Ill.

American Insurance Co., Newark, N. J.

American Re-Insurance Co., New York, N. Y.

American Surety Co. of New York, New York, N. Y.

Bankers Indemnity Insurance Co., Newark, N. J.

Boston Insurance Co., Boston, Mass.

Car and General Insurance Corp., Ltd., New York, N. Y.

Century Indemnity Co., Hartford, Conn.

Columbia Casualty Co., New York, N. Y.

Commercial Casualty Insurance Co., Newark, N. J.

Connecticut Fire Insurance Co., Hartford, Conn.

Connecticut Indemnity Co., New Haven, Conn.

Eagle Fire Co. of New York, New York, N. Y.

Employers Insurance Co. of Alabama, Inc., Birmingham, Ala.
Employers' Liability Assurance Corp,. Ltd., Boston, Mass.
Employers Reinsurance Corp., Kansas City, Mo.

Equitable Fire and Marine Insurance Co., Hartford, Conn.
Fidelity and Casualty Co. of New York, New York, N. Y.

Fidelity and Deposit Co. of Maryland, Baltimore, Md.

Fire Association of Philadelphia, Philadelphia, Pa.

Fireman's Fund Indemnity Co., San Francisco, Calif.

Franklin National Insurance Co. of New York, Hartford, Conn.
General Accident, Fire & Life Assurance Corp. Ltd., Philadelphia, Pa.
General Reinsurance Corp., New York, N. Y.

Glens Falls Indemnity Co., Glens Falls, N. Y.
Glens Falls Insurance Co., Glens Falls, N. Y.
Globe Indemnity Co., New York, N. Y.

Great American Indemnity Co., New York, N. Y.
Guarantee Insurance Co., Los Angeles, Calif.

Hartford Accident and Indemnity Co., Hartford, Conn.

Hartford Steam Boiler Inspection & Insurance Co., Hartford, Conn.
Hawkeye-Security Insurance Co., Des Moines, Iowa.

Home Indemnity Co., New York, N. Y.

Home Insurance Co., New York, N. Y.

Home Insurance Co. of Hawaii, Ltd., Honolulu, T. H.

Indemnity Insurance Co. of North America, Philadelphia, Pa.
Insurors Indemnity & Insurance Co., Tulsa, Okla.

London & Lancashire Indemnity Co., Hartford, Conn.

London Guarantee and Accident Co., Ltd., New York, N. Y.
Manufacturers Casualty Insurance Co., Philadelphia, Pa.
Maryland Casualty Co., Baltimore, Md.

Massachusetts Bonding & Insurance Co., Boston, Mass.
Mechanics and Traders Insurance Co., Hartford, Conn.

Merchants Indemnity Corp. of New York, New York, N. Y.

Metropolitan Casualty Insurance Co. of N. Y., Newark, N. J.

National Automobile & Casualty Insurance Co., Los Angeles, Calif.

National Surety Corp., New York, N. Y.

National Fire Insurance Co. of Hartford, Hartford, Conn.

National Union Indemnity Co., Pittsburgh, Pa.

New Amsterdam Casualty Co., Baltimore, Md.

Newark Insurance Co., New York, N. Y.

New England Insurance Co., Springfield, Mass.

New York Casualty Co., New York, N. Y.

North American Casualty & Surety Reinsurance Corp., New York, N. Y. Norwich Union Fire Insurance Society, Ltd., New York, N. Y.

Ocean Accident & Guarantee Corp., Ltd., New York, N. Y.

Ohio Farmers Indemnity Co., Le Roy, Ohio.

Old Colony Insurance Co., Boston, Mass.

Pacific Insurance Co., Ltd., Honolulu, T. H.

Phoenix Indemnity Co., New York, N. Y.

Phoenix Insurance Co., Hartford, Conn.

Preferred Accident Insurance Co. of New York, New York, N. Y.

Providence Washington Indemnity Co., Providence, R. I.

Providence Washington Insurance Co., Providence, R. I.

Public National Insurance Co., Miami, Fla.

Royal Indemnity Co., New York, N. Y.

St. Paul-Mercury Indemnity Co., St. Paul, Minn.

Seaboard Surety Co., New York, N. Y.

Security Insurance Co. of New Haven, New Haven, Conn.

Southern Fire & Casualty Co., Knoxville, Tenn.

Springfield Fire & Marine Insurance Co., Springfield, Mass.
Standard Accident Insurance Co., Detroit, Mich.

Sun Indemnity Co., New York, N. Y.

Transcontinental Insurance Co., Hartford, Conn.
Travelers Indemnity Co., Hartford, Conn.

Travelers Insurance Co., Hartford, Conn.

Tri-State Insurance Co., Tulsa, Okla.

United National Indemnity Co., Hartford, Conn.

United States Casualty Co., New York, N. Y.

United States Fidelity & Guaranty Co., Baltimore, Md.

United States Guarantee Co., New York, N. Y.

Yorkshire Indemnity Co., New York, N. Y.

Zurich General Accident & Liability Insurance Co., Ltd., Chicago, Ill.