down that "Present and future statutory and administrative controls shall keep to a minimum the amounts required as guarantees in order to prevent the dispersal of the assets of the insurers, insofar as this is compatible with the protection of the parties insured. Guarantee deposits shall have no other aim than the protection of the insured parties."

(c) Financial transfers in connection with insurance and reinsurance transactions. Such transactions should be entirely free.

2. Practicable measures

The Committee offers the following suggestions for measures which it might I be practicable to apply, and which might be recommended within the terms of the United Nations study, with a view to minimizing the disadvantages resulting from discriminatory practices in transport insurance. After studying inter alia the memorandum submitted by General Transport Commission of the ICC to the Transport and Communications Commission of the United Nations (Doc. No. 301/50 CCI), the Committee considers that in the first instance discriminatory measures might be removed which, in any given country:

(a) reserve a monopoly in transport insurance to national companies only, by the systematic exclusion of foreign companies which wish to be admitted on the same conditions as those laid down for national companies;

(b) impose a general obligation on national importers and exporters to export C. I. F. and import f. o. b. in such a way as to reserve the insurance of the country's imports and exports to the national insurance market;

(c) make the concession of licenses or the granting of foreign exchange conditional upon the insurance of cargoes on the national insurance market;

(d) forbid insurance being placed in foreign exchange in every case, and without justification by overriding considerations connected with the exchange balance; (e) forbid the placing in the foreign insurance market of risks which cannot be covered in the domestic market.

The Committee points out that the above observations do not express its ideas 1 of the characteristics which the organization of the different national marine insurance markets should possess under normal economic and political conditions. It wishes to emphasize that in making this study it has been guided by the desire to make only those suggestions which can be considered in the light of the present economic and financial situation. In particular it has regretfully come to the conclusion that the present situation is not calculated to make governments desist from the efforts which they have undertaken, notably as a result of experiences during the last war, to establish in their countries, at the cost of certain restrictions, national marine insurance markets capable of covering a certain minimum of their national needs under all circumstances.

The Committee is, however, of the opinion that this objective can be attained without the establishment or maintenance of the discriminatory measures mentioned above.

Mr. CHUBB. I would like to say that by and large the attitude of the State Department has changed, and we hope they will continue to be helpful. They have many interests to protect. We hope they will not forget us in doing that.

The second field in which American marine underwriters have a problem at the Government level lies in the area of operations formerly controlled by the Economic Cooperation Administration and now controlled by the Mutual Security Administration. I would like to stress at this point that marine underwriters have at all times been fully aware of the problems faced by the Government in dealing constructively with this problem.

They have recognized that the marine insurance question must be viewed in the overall framework of the purposes of foreign aid programs; and they have resisted suggestions that Congress be asked for mandatory legislation requiring American insurance.

Nevertheless, they have felt that the position taken by the Government agencies presents a real opportunity to foreign governments to discriminate unfairly against American interests and to eliminate free and fair competition from this field. They further are convinced that

certain foreign governments have not hesitated to take advantage of this situation and to indulge in discriminatory practices.

Let me try to put this problem in the very simplest of terms. In 1949, it was enacted by the Congress that the Economic Cooperation Administration would

commodities

make available United States dollars for marine insurance on where such insurance is placed on a competitive basis in accordance with normal trade practices prevailing prior to the outbreak of World War II.

Notwithstanding the authorization, the ECA and its successor, the Mutual Security Administration, have found it necessary to make a requirement that the dollars in question will be provided only when requested by the government receiving the aid.

This requirement puts the recipient government in a position to exert great pressure upon the foreign importer to place such insurance in the insurance market of the recipient nation, notwithstanding the fact that American underwriters might be willing to insure the business at substantially lower rates. American marine insurers are satisfied that such pressure is the rule rather than the exception and that in a substantial number of cases marine insurance is placed at very much higher rates than would be available in the American market.

Consistent with policy of marine underwriters in the past, I believe that the cure for this situation is administrative rather than legislative, and that the law now on the books was designed to accomplish what we are urging.

In this connection, I would like to call the attention of the committee to the colloquy between Senator Saltonstall and Senator Smith, appearing on page 8000 of the Congressional Record of July 1, 1953. This exchange makes it clear that it was the intention of the ECA Act, as amended, to give American companies an opportunity to compete for such insurance as might be placed on the shipments requested. Steps have been taken to bring this viewpoint before the new administration; and it is my hope that the facts are so clear and reasonable that an administrative solution can be found which will not conflict with the basic objectives of the MSA.

Senator POTTER. What is MSA's position today?

Mr. CHUBB. I do not think they have defined it. I think there is correspondence going on right now. The position has not been put forth since the new administration has come in. As you know, some of the officials of MSA have been pretty busily occupied on other matters lately.

I hope we can put forward what is a perfectly fair and decent proposal that will be within the terms of the present act and will not conflict with what MSA is trying to accomplish.

Senator BUTLER. What was the purpose in putting in the requirement that it would only be required as to the government receiving the aid?

Mr. CHUBB. The position taken by Paul Hoffman, among others, was that there was a certain pool of dollars made available to each country. The extent to which they used that pool for steel, shipping, or other services, should be determined by the country receiving it. We did not want to dictate how they would spend those dollars. Senator POTTER. We tell them what bottoms to use.

Mr. CHUBB. That is done by legislation.

Senator POTTER. They are going to be in American bottoms.

Mr. CHUBB. That is done legislatively; yes, sir. We have never felt, for the reasons that you have suggested, that we wanted to ask for mandatory legislation because we felt it would boomerang on us in other countries.

What we would like to have and hope to get MSA to do is to withdraw the requirement that the importer has to get permission of his government in placing his insurance in dollars.

You see, if he places his insurance in lira, francs, or some other soft currency, and the goods are lost, he has to come after more dollars to replace them. It is different from the shipping business. That is the point I believe we can drive home effectively.

Senator POTTER. I would be interested in seeing what reaction you get from MSA. I would like to have you keep the committee informed.

Mr. CHUBB. We will certainly do that, sir.

I wish to thank the committee for the courtesy shown me in inviting me to appear today. While, as I have stressed, the American marine insurance market has never asked for legislative protection, the statements made by the various congressional committees in the past as to the importance of an American marine insurance market to the American merchant marine and to the foreign commerce of the United States have been most encouraging and have given us heart to tackle our problem with vigor. Any reaffirmation of this principle which your committee might see fit to make would certainly be most helpful to us in facing the future. I would be happy to answer any questions to the best of my ability.

Senator POTTER. Senator Butler, do you have any questions?

Senator BUTLER. I have some questions I would like to ask, but I do not know enough about the subject at the moment. I will skip them for now. I am certainly going to look into this MSA business. Senator POTTER. I am in much the same position as Senator Butler. It is a highly technical field. You certainly have a friendly committee, who will work with you in every way possible.

Senator BUTLER. As I understand it, at first blush, we give them the goods, yet we cannot have anything to say as to whether our own insurance companies shall have a right to bid on the shipment which is to go abroad?

Mr. CHUBB. It works out in many cases.

Senator POTTER. And in many cases we pay more for the insurance? Senator BUTLER. And we have to give them more dollars if they give them insurance in soft currencies.

Mr. CHUBB. They have to come back for more dollars, yes. It comes off the other end.

Senator POTTER. They are spending it for one thing, so why not another?

Senator BUTLER. How long have you been working on this problem? Mr. CHUBB. I was first brought down and asked for my views in 1948 by the old MSA crowd. I discussed it with Mr. Hoffman.

Senator BUTLER. How long has it been going on under this new administration?

Mr. CHUBB. I do not believe the new administration has had time to reach a decision on it. There has been correspondence on it, which I have not been a party to. I do not believe a final decision has been

36174-53-pt. 1-39

taken yet. I think the thing was taken up first in maybe March or April.

Senator POTTER. You do not know whom they contacted in MSA? Mr. CHUBB. I imagine they wrote to the director, himself. Our general practice has been to go to the top with these things.

Senator BUTLER. I hope the chairman of this subcommittee will appoint a committee of two, consisting of Senator Potter and myself, to see the Mutual Security Administrator about this problem.

Mr. CHUBB. We realize that we are only part of a complex problem. We have hoped the thing could be worked out on a basis where we could compete.

Senator POTTER. Where American dollars are provided for the program, you want to be in a position to compete for the business.

Senator BUTLER. You should be able to compete for the business which our own taxes are paying for.

Senator POTTER. I wish to thank you, Mr. Chubb, for giving us this interesting testimony.

Mr. CHUBB. Thank you, sir, for the opportunity. Before I leave, I would like to submit for the record this summary of legislation and committee action bearing on marine insurance.

Senator POTTER. Without objection, it will be made a part of the record at this point.

(The material referred to is as follows:)

A SUMMARY OF LEGISLATION AND COMMITTEE ACTION BEARING ON MARINE INSURANCE

The 64th Congress became concerned about the large percentage of insurance on American ships and cargo that was being written abroad. Accordingly, in the Shipping Act of 1916, it directed the Shipping Board to inquire into the situation to ascertain what steps might be taken to develop the American marine insurance industry as an aid in the development of the American merchant marine. Section 12 of the Shipping Act of 1916 (Public Law 260, 64th Cong., 46 USCA 811) provides in part as follows:

*** it (the Shipping Board) shall examine into the subject of marine insurance the number of companies in the United States, domestic and foreign, engaging in marine insurance, the extent of the insurance on hulls and cargoes placed or written in the United States, and the extent of reinsurance of American maritime risks in foreign companies, and ascertain what steps may be necessary to develop an ample marine insurance system as an aid in the development of an American merchant marine."

In the 66th Congress, the whole question of the expansion and strengthening of the American merchant marine, which had taken on new importance by reason of wartime ship construction, was under thorough reexamination. As a result of this study, the Merchant Marine Act of 1920 was passed with the declared purpose "to do whatever may be necessary to develop and encourage the maintenance of" a strong merchant marine.

In connection with its enactment, the Senate Committee on Commerce held very extensive hearings, commencing June 10, 1919, and continuing until March 13, 1920, the record comprising some 2,089 printed pages. In considering the best means of strengthening the American merchant marine "to the end that it would be able to carry the greater portion of the commerce of the United States and serve as a naval and military auxiliary," the Senate and House committees also studied the interrelation of marine insurance and the expansion of the merchant marine. Two sessions of the Senate hearings were devoted to the marin› insurance provisions of the proposed legislation (pp. 1334-1380, Senate Commerce Committee hearings, 66th Cong., 1st sess., Feb. 17 and 18, 1920).

In the meantime, the Subcommittee on Miscellaneous Business of the Committee on Mercha t Marine and Fisheries of the House of Representatives, held extensive hearings on the subject of American marine insurance for the express purpose of finding a way to build up or encourage the American marine insurance

business. These hearings, held on July 9, 16, and 17, and September 26 and 27, 1919, comprise some 354 printed pages, all devoted to marine insurance (House committee hearings, vol. 236, pts. 2 and 4, 66th Cong., 1st sess.). This subcommittee also caused to be printed and bound with the committee hearings a Report on the Status of Marine Insurance of the United States by Prof. S. S. Huebner, who was staff assistant to the committee, and certain recommendations of the subcommittee, which report and recommendations were approved by the full committee on February 26, 1920.

As shown by the following quotation from the above-mentioned recommendation adopted by the House committee on February 26, 1920, a strong American marine insurance industry was envisioned as an affirmative instrument for increasing foreign trade:

"In its investigation of marine insurance in the United States, your committee as examined exhaustively into the functions, present status, and legislative needs of this branch of insurance. All evidence leads to the conclusions that a strong and independent national marine insurance institution is an absolute necessity to a nation's foreign-trade equipment, that such an institution does not exist in the United States today, and that it is imperative to adopt ways and means to correct the present impossible situation if this country is to meet the strenuous international rivalry that the new era is certain to inaugurate. There can be no doubt, judging from the manner in which our competitors are now seeking to undermine this branch of underwriting, that marine insurance will be used, as probably never before, as a national commercial weapon for the acquisition and development of foreign markets. Failure to act now in strengthening our marine insurance facilities and placing them in an independent position free from foreign control, cannot be regarded otherwise than as the neglect of a duty and an opportunity. The loss of the present rich opportunity will soon be bitterly regretted, but it will be too late to undo the mischief” (p. 75).

As a result of these extensive studies and hearings, the so-called Edmonds bill, H. R. 13889, relating to marine insurance, was passed. This become section 29 of the Merchant Marine Act of 1920 (act of June 5, 1920, C. 250, sec. 23, 41 Stat. 1000, 46 U. S. C. A. 885), which reads as follows:

"29. (a) Whenever used in this section

"(1) The term 'association' means any association, exchange, pool, combination, or other arrangement for concerted action; and

"(2) The term 'marine insurance companies' means any persons, companies, or associations, authorized to write marine insurance or reinsurance under the laws of the United States or of a State, Territory, District, or possession thereof. "(b) Nothing contained in the 'antitrust laws' as designated in section 1 of the Act entitled 'An Act to supplement existing laws against unlawful restraints and monopolies, and for other purposes,' approved October 15, 1914, shall be construed as declaring illegal an association entered into by marine insurance companies for the following purposes: To transact a marine insurance and reinsurance business in the United States and in foreign countries and to reinsure or otherwise apportion among its membership the risks undertaken by such association or any of the component members."

The legislative intent of public policy involved in the enactment of the Merchant Marine Act of 1920 has been reiterated and reaffirmed by subsequent Congresses. Thus, in section 1 of the Merchant Marine Act of 1928 (46 U. S. C., sec. 891), the 70th Congress explicitly stated:

"The policy and primary purpose declared in section 1 of the Merchant Marine Act, 1920, are hereby confirmed."

To like effect is the declaration of the 74th Congress in the Merchant Marine Act of 1936 (46 U. S. C., sec. 1101). Even more specific is the declaration of the 79th Congress in the Merchant Ship Sales Act of 1946, where, in section 2 (50 U. S. C., sec. 1735), it is set forth that:

"(a) It is necessary for the national security and development and maintenance of the domestic and the export and import foreign commerce of the United States that the United States have an efficient and adequate American-owned merchant marine ✶✶✶ supplemented by efficient American-owned facilities for shipbuilding and ship repair, marine insurance, and other auxiliary services.

"(b) It is declared to be the policy of this Act to foster the development and encourage the maintenance of such a merchant marine."

See also, the statement of the House Committee on Merchant Marine and Fisheries in its report on the act providing for United States-flag shipping participation in Government-financed cargoes (H. Rept. 220, 81st Cong., 1st sess., on H. R. 1340):