The reasons for such a proclamation are indicated by its contents, which are as follows:

Whereas, Certain insurance companies incorporated under the laws of the German Empire have been admitted to transact the business of insurance in various states of the United States by means of separate United States branches, established pursuant to the laws of such states, and are now engaged in business under the supervision of the insurance departments thereof, with assets in the United States deposited with insurance departments, or in the hands of resident trustees, citizens of the United States; for the protection of all policyholders within the United States; and,

Whereas, The interests of the citizens of the United States in the protection afforded by such insurance are of great magnitude, so that it is deemed to be important that the agencies of such companies in the United States be permitted to continue in business; now,

Therefore, I, Woodrow Wilson, President of the United States of America, by virtue of the powers vested in me as such, hereby declare and proclaim that such branch establishments of German insurance companies, now engaged in the transaction of business in the United States, pursuant to the laws of the several states, are hereby authorized and permitted to continue the transaction of their business in accordance with the laws of such state in the same manner and to the same extent as though a state of war did not now exist.

Provided, however, that all funds of such establishments, now in the possession of their managers or agents, or which shall hereafter come into their possession, shall be subject to such rules and regulations concerning the payment and disposition thereof as shall be prescribed by the insurance supervising officials of the state in which the principal office of such establishment in the United States is located, but in no event shall any funds belonging to or held for the benefit of such companies be transmitted outside of the United States nor be used as the basis for the establishment, directly or indirectly, for any credit within or outside of the United States, to or for the benefit or use of the enemy or any of his allies without the permission of this government.

(Signed) WOODROW WILSON,

President.

Upon the issuance of this proclamation, the officials of the states in which such insurance organizations had been admitted to do business, published the conditions to govern such foreign marine insurance companies. The orders of the Superintendent of Insurance of New York, the state in which the largest amount of this insurance is transacted, show the character of this supervision.

Superintendent of Insurance Phillips of New York issued the following statement with respect to the manner in which the principles contained in the proclamation will be administered by the New York Insurance Department:

In view of the proclamation of the President, German insurance companies admitted in this state will be permitted to continue the transaction of business the same as if a state of war did not exist between this country and Germany, provided such companies meet the capital and deposit requirements of our statutes and maintain the statutory reserves.

In accordance with the proclamation, rules and regulations will be prescribed to require the managers of such companies to keep in the United States all of the assets now or which may hereafter come into their possession for the benefit of American policyholders. I am not prepared to state the precise rules and regulations which may be adopted by this department, except to say they will be sufficient to prevent any portion of the assets being used for the benefit of the enemy or any of its allies.'

But this did not prove adequate for the situation as it developed, and the causes for the change and the second proclamation of the President are set forth as follows:2

It is a well known fact that the insurance capital of this country is inadequate for the provision of safe coverage for all the risks of various kinds requiring insurance. Indeed, in all the departments of insurance, the foreign countries, through their branches domiciled here, play a very large and probably indispensable part in supplying us with the insurance we need. Consideration of this state of things and the perception that the methods of organization and operation of American branches of foreign companies compelled by our insurance laws gives these branches the character of essentially independent insurance institutions, led President Wilson to issue a proclamation under the terms of which even the American branches of German insurance companies were permitted to carry on their underwriting just as in time of peace, provided they discontinued all business and financial relations with their Home Office.

Later, however, events led the government to believe that a distinction should be made between marine and marine war risk insurances and reinsurances, as carried or participated in by American branches of German insurance companies, and the other forms of insurance. Information was found mysteriously to reach the German government with respect to the voyages and the cargoes of ships clearing from ports of the United States; and through this information the German submarines seemed to find it easy

1 The Economic World, n. s., vol. xiii, No. 15, p. 527.

2 Ibid., vol. xiv, No. 3, p. 93.

to intercept such vessels and to destroy them. It was charged that the data given to the American branches of German marine insurance and reinsurance companies in connection with the marine and marine war risk insurance offered to them, and curiously enough often taken by them, were not held as confidential, but were surreptitiously conveyed to the German naval authorities with the object of enabling them to plan the destruction of the ships by submarines, practically without danger to these piratical craft. There was much public talk of vessels leaving American ports and taking very unusual courses to their destinations, yet met by submarines at unexpected places in mid-ocean and destroyed. An embellishment of several of these accounts was a reported remark of the submarine commander to the master of the unfortunate merchantman, to the effect that the latter was one or more days late in reaching the scene of the rencontre. From such incidents as this it was deduced that the submarine commander had been given in advance precise details of the voyage of the doomed ship, such as only the owners and the master could possibly possess apart from the marine underwriters, to whom supposedly all information of this character must be given in connection with the insurance or reinsurance contract entered into by them. . . .

Positive evidence, often unobtainable, is unnecessary to warrant governImental action in cases of this kind. Hence President Wilson deemed it wise, in the interest of the country, to prohibit American branches of German insurance companies from writing marine and marine war risk insurances or reinsurances in the United States for the duration of the war. This prohibition is contained in a proclamation of the President, issued on Saturday, July 14, the text of which is as follows:

President Wilson's Proclamation

Whereas, Certain insurance companies incorporated under the laws of the German Empire have been admitted to transact the business of marine and war risk insurance in various states of the United States by means of separate state branches established pursuant to the laws of such states, and are now engaged in such business under the supervision of the insurance departments thereof, with assets in the United States deposited with insurance departments or in the hands of resident trustees, citizens of the United States, for the protection of all policyholders in the United States; and, Whereas, The nature of marine and war risk insurance is such that those conducting it must of necessity be in touch with the movements of ships and cargoes, and it has been considered by the government of great importance that this information should not be obtained by alien enemies;

Now, therefore, I, Woodrow Wilson, President of the United States of America, by virtue of the powers vested in me as such, hereby decree and proclaim that such branch establishments of German insurance companies now engaged in the transaction of business in the United States, pursuant to the laws of the several states, are hereby prohibited from continuing the transaction of the business of marine and war risk insurance either as direct

insurers or reinsurers; and all individuals, firms and insurance companies incorporated under the laws of any of the states or territories of the United States or of any foreign country, and established pursuant to the laws of such states and now engaged in the United States in the business of marine and war risk insurance, either as direct insurers or reinsurers, are hereby prohibited from reinsuring with companies incorporated under the laws of the German Empire, no matter where located; and all persons in the United States are prohibited from insuring against marine or war risks with insurance companies incorporated under the laws of the German Empire or with individuals, firms and insurance companies incorporated under the laws of any of the states or territories of the United States or of any foreign country and now engaged in the business of marine or war risk insurance in the United States, which reinsure business originating in the United States with companies incorporated under the laws of the German Empire, no matter where located.

The foregoing prohibitions shall extend and operate as to all existing contracts for insurance and reinsurance which are hereby suspended for the period of the war, except that they shall not operate to vitiate or prevent the insurance or reinsurance of and the payment or receipt of premiums on insurance or reinsurance under existing contracts on vessels or interest at risk on the date of this proclamation, and such insurance or reinsurance, if for a voyage, shall continue in force until arrival at destination, and if for time, until thirty days from the date of this proclamation, but if for a voyage at that time, until the arrival at destination.

Nothing herein shall be construed to operate to prevent the payment or receipt of any premium or claim now due or which may become due on or in respect to insurances or reinsurances not prohibited by this proclamation.

That all funds of such German companies now in the possession of their managers or agents, or which shall hereafter come into their possession, shall be subject to such rules and regulations concerning the payment and disposition thereof as shall be prescribed by the insurance supervising officials of the state in which the principal office of such establishment in the United States is located, but in no event shall any funds belonging to or held for the benefit of such companies be transmitted outside of the United States, nor be used as the basis for the establishment, directly or indirectly, of any credit within or outside of the United States to or for the benefit or use of the enemy or any of his allies without the permission of this government.

In witness whereof, I have hereunto set my hand and caused the seal of the United States to be affixed.

Done at the District of Columbia this 13th day of July, in the year of our Lord one thousand nine hundred and seventeen and of the independence of the United States the one hundred and forty-second.

WOODROW WILSON.

TRADING WITH THE ENEMY ACTS AND INSURANCE

The whole matter in all the leading nations at war was later and fully covered in the various "trading with the enemy" acts which were passed.

In the Trading with the Enemy Act of the United States, a special case is made of insurance companies whose owners are citizens of Germany or her allies, in that the property of the United States branches of these companies does not have to be turned over to the Alien Property Custodian, to be administered by him in accordance with the intent of the law. Under a licensing system these companies may continue their business in the United States, though of course without the right to transmit funds or to continue business intercourse with their home offices. Moreover, enemy insurance companies are wholly forbidden to write policies of marine or war risk insurance. The text of that part of the act, Section 4 (a), is as follows:

SECTION 4 (a). Every enemy or ally of enemy insurance or reinsurance company, and every other enemy or ally of enemy, doing business within the United States through an agency or branch office, or otherwise, may, within thirty days after the passage of this act, apply to the President for a license to continue to do business; and, within thirty days after such application, the President may enter an order either granting or refusing to grant such license. The license, if granted, may be temporary or otherwise and for such period of time and may contain such provisions and conditions regulating the business, agencies, managers and trustees and the control and disposition of the funds of the company or of such enemy or ally of enemy as the President shall deem necessary for the safety of the United States, and any license granted hereunder may be revoked or regranted or renewed in such manner and at such times as the President shall determine.

Provided, however, that reasonable notice of his intent to refuse to grant a license or to revoke a license granted to any reinsurance company shall be given by him to all insurance companies incorporated within the United States and known to the President to be doing business with such reinsurance company.

Provided, further, that no insurance company, organized within the United States, shall be obliged to continue any existing contract or treaty, entered into prior to the beginning of the war, with any enemy or ally of enemy insurance or reinsurance company, but any such company may abrogate and cancel any such contract or treaty by serving thirty days' notice in writing upon the President of its election to abrogate such contract or treaty.