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other, as the case may be. In doing this, it should be remembered that the underwriter still remains under the contingent liability above referred to, but, of course, he will use his discretion, and take into consideration the stability of the broker with whom he is dealing.
Nominally, claims are due and payable within seven days. of their being "taken down" by the underwriter; and in the event of a broker collecting a claim under total loss, he must pay up all premiums due to the end of the month preceding that in which the loss is settled. Consequently it may happen that a claim is actually paid by the underwriter before he has received any premium in respect thereof. As an illustration of this, the following may be instanced:-A policy is signed on the 1st of July, and the premium consequently, by custom, is due and payable by the broker on the 8th of August, or at a later date in the event of his credit having been extended; the claim is taken down on the 10th of the same month, and payable by the underwriter before the 18th. Now, as stated above, all premiums due to the end of the month preceding the taking down of the loss-viz., 30th of June-are forthwith payable by the broker, and, since in this instance it is obvious that no premium was due at that date, it follows that the claim will have to be paid by the underwriter before he receives any premium in respect thereof.
It may be well to mention that the remuneration receivable by the broker for collecting claims on behalf of the assured is generally at the rate of 1 per cent. on the amount thereof, and is payable by the latter.
Salvages, Refunds, and Recoveries.-These items, although formerly received direct from the parties concerned, are now receivable through the broker, who usually pays
by clear cheque, the transactions not being treated in account. They are paid promptly on the final settlement of their amount, and are not incorporated in the underwriter's books of account until actually received by him, unless he is furnished with a preliminary credit note.
As regards salvage, the non-incorporation in the books until receipt of the cash was formerly the cause of considerable loss to underwriters, inasmuch as it was very easy to lose sight of salvage relating back to claims settled years previously, and some salvors took advantage of this opportunity, with the result that the underwriters, especially in cases of small salvages, frequently never received the same at all. To remedy this state of affairs a leading underwriter recently put forward the proposal that the Committee of Lloyd's should, in return for a small percentage, follow up each particular case of salvage, and so protect the interests of the underwriters concerned. This plan has been carried into effect, and has proved very successful.
AN UNDERWRITER'S BOOKS OF ACCOUNT.
List of Books. —
THE following are the books essential for recording an underwriter's transactions, those marked with an asterisk not forming part of the double entry:—
*(1) Risk Book.
*(2) Voyage Book.
(3) Premium or Signing Books.
*(4) Re-insurance Index.
(5) Re-insurance Books.
(6) Claim Books.
(7) Salvage Books.
(8) Cash Book.
(9) Petty Cash Book.
(10) Brokers' Ledger.
(11) Private Ledger.
(12) Investment Ledger.
Before proceeding to discuss the books in detail, it will be necessary to briefly consider the question of "collective form,” as it is comparatively rare now to find business of any magnitude recorded otherwise outside the syndicates. Most underwriting agents have several " names "whom they write for, and it has been found that the labour involved in keeping a separate set of books for each name is so enormous, and the opportunities for error are so frequent, that a system which is here termed "Collective Form" has been evolved to meet the situation. As the group of names written for by one agent has none of the attributes of a partnership, it is essential, while keeping only one set of books, that the transactions affecting each name, and the results thereof, should be kept entirely distinct. For this purpose every book of account relating to the double-entry must be ruled with a number of columns, varying with the number of the names written for. One column is set apart for every name, and, as the agent will almost invariably write for each of his names on every risk he accepts (though the proportion may not necessarily be the same for all), it follows that those columns of the various books recording the general particulars of the transactions will apply equally to all, the only repetition involved being the insertion of the doubleentry figures for each name separately in the columns set apart for this purpose.
In consequence of this, the pro formâ accounts appearing in this volume have been drawn up on the above principle, which is undoubtedly the most practicable. At the same time, in cases of syndicates, or where only one account is being written, or where, for some special reason, it is desirable to keep a separate set of books for each name, the examples will still be applicable, it being only necessary to eliminate the superfluous column.
It should be noted that, before collective form can be employed, it is essential to obtain the consent of all the names thereto, to avoid any subsequent misunderstanding arising.
Space being limited, the instance that has been chosen as an illustration will be that of Mr. X., underwriting agent, writing for his two names, Mr. A. and Mr. B., in the proportion of two to
The term syndicate is used to denote a group of names taking equal lines, and written for by one agent. On every risk the latter accepts he will write an equal amount for each of his names, and consequently every subsequent transaction will also be divisible equally between them. In fact, inter se, they may be said to be equal in all respects. It follows therefore that if one record of all the transactions be kept in total, and the results divided at the end of each year by the number of names composing the syndicate, the working, as it affects each particular name, can be very simply and accurately arrived at. This method is adopted now by the syndicates, and is known as syndicate form. The clerical labour it saves in the case of syndicates composed of any considerable number of names is sufficiently obvious, to say nothing of the way in which chances of error are minimised. As stated above, the illustrative accounts given in this volume will apply equally in the case of a syndicate if the name column headed "B" is eliminated, that headed "A" being taken to represent the total dealings of a syndicate composed of, say, four names.
When a slip has been presented by a broker to the underwriter, and the latter, having decided to accept the risk, signs