REPORT Of THE COMMISSIONER OP INSURANCE.


69


tain sum, usually two, three or five times the amount of the
deposit premium, which is held in trust by the advisory commit-
tee for the paynieat of excess losses. In other associations,
no cash deposit is required but the subscribers simply sign the
power of attorney, which usually embodies a clause stating the
amount of the liability of the subscriber on any one risk. As
the subscribers of most exchanges are business men having a
financial rating in commercial agencies, their obligations for a
small amount cannot be questioned, and consequently they are
not required, by the exchanges, to put up a cash deposit.
The various subscribers are represented by an advisory com-
mittee, usually composed of three, five, seven, nine. or eleven
members. This committee has charge of all of the assets belong-
ing to the subscribers. The attorney-in-fact is empowered to make
the exchange of contracts for the subscribers and to transact the
insurance business in their behalf. It usually audits the books
of the attorney, and either personally signs all checks or drafts
drawn on the funds belonging to the subscribers, or authorizes
some other person, usually an official of a trust company or'
bank, to affix iheir signatures.
The attorney-in-fact receives a stated commission for his ser-
vices. Usually this is 15%  or 207c, in case of fire insurance
business, and 25%o to 30%o in casualty business. This conunis-
sion is usually in full payment for all expenses of the exchange.
The payment of salaries, the keeping of the records, the issuing
of the contracts, the inspection of the risks, and all other ex-
penses having to do with the underwriting part of the exchange,
are paid by the attorney-in-fact. Therefore, the subscribers at
all times know exactly the amount of their deposit premiums
that will be set aside for expenses and for protection. There is,
therefore, in these exchanges a limited expense ratio, and this is
one of the strong points in their favor. The remaining portiou
of the subscriber's deposits which is not paid out for losses is
returned to him in the form of savings. As the inspection of
the risks becomes more thorough and searching, the amount of
loss by fire decreases and the savings become greater. The sub-
scriber feels that he is a part of the exchange and very willingly
consents to make such alterations in his plant ol- building as
will reduce the fire hazard to a minimum. Most of the ex-
changes are making inspections of risks at least six times a year,