their services and acted as agents issuing "Warships” policies and reporting insurances effected thereunder.
Exchange operations were continued with depleted staffs as men and women were called to the armed services. By the end of the war the Exchanges reinsurance arrangements had obviously fulfilled a great need.
Now, four decades later, This War Risk Exchange is still in effect although modified somewhat. The processing of reports has been vastly simplified by modern methods. More recent headlines include: Iraq reports destroying five ships in Persian Gulf... Polish vessel hits a mine in Red Sea. The War Risk Exchange is still operating to protect its clients.
The War Risk Exchange Logistics
Its characteristics are that each member company cedes to the Exchange 100 percent of its cargo war risk liability, then each subscriber participates for an agreed fixed percentage in the combined liability of all the subscribers. If, for example, a company agrees to take a 5 percent share, it reports 100 percent of its war risk premiums to the Exchange and then “takes out” 5 percent of the total premiums reported by all members. Any losses are treated in the same manner. Managers are appointed to verify and approve claim adjustments in accordance with the regulations of committees elected from the membership.
This type of reinsurance agreement is well suited to war risk insurance as it is imperative that all companies be on a uniform basis as to rates and conditions. All insurers must interpret their policies in the same manner when settling claims. Such uniformity can result in almost unlimited reinsurance facilities on cargo business. Each insurer provides coverage under “open policies” for shipments to be made in the future for amounts up to an agreed limit per voyage. At the time of the German invasion the limit was $2,000,000, but more frequently $1,000,000 or less was committed. Of course, several clients can have cargoes on the same ship on any one voyage. The insurer often doesn’t know of such an overline normally until the ship is well at sea or more likely after the cargo reaches its destination.
The operation of a cargo reinsurance agreement was not a new development in 1939. A number of agreements had been in existence for years, the larger ones being the Export Cotton, Burlap, Export Auto and Coastwise Agreements. The War Risk managers had a trained staff and the necessary equipment; in those days IBM operated with punched cards. Reports to the Exchange were typed via bordereaux. A bordereau was a large sheet of paper printed with various columns, each identified with brief headings. The companies typed in required details such as policy number, steamer name and voyage, liability, and premium. Each horizontal line was a risk and each page (or bordereau) provided the essential details of many risks. This was the customary method of reporting reinsurance in 1939. Companies now report only monthly totals of their war premiums.
Bordereaux with thousands of reports soon flooded the office of the Exchange manager. From the cards punched in this manner were produced monthly totals of premiums reported by each member. A composite monthly report was sent to all members and they were required to remit any balance due the Exchange. The companies were allowed a reinsurance discount equal to brokerage plus a small percentage to cover their cost of handling.
After World War II, the Exchanges reinsurance requirements were met by an Excess of Loss Cover, thereby eliminating the detail required by the former Excess Line, Facultative, and Quota Share reinsurances and the reporting of individual risks by bordereaux
Premium on cargo business, usually reported after loading on exports and discharge on