The Insurance Mystery

U.S. exporters and their foreign customers are mystified by the discrepancy between U.S. and British marine war-risk insurance rates. Last week War Shipping Administration was still charging rates almost double those charged by the British War Risks Insurance Office for exactly the same services. Some comparative rates from U.S. Atlantic ports:

> To Brazil and the River Plate: WSA 15%, British 6%.

> To South Africa: WSA 17 1/2%, British 7 1/2

> To India: WSA 17 1/2%, British 12 1/2%.

> To South America, West Coast: WSA 12 1/2%, British 6%.

The only reason that London has not captured the entire world insurance market lies in its insistence that claims be paid in sterling. But, even so, many a Latin American trader is switching from U.S. to British insurance because of the big saving. (Sterling accrued from claim settlements can be used to purchase British goods after the war.)

Meanwhile the U.S. is building up for itself a special kind of ill will in South America because imports and exports are handled on different rate bases. Exports to South America are charged the full insurance rate. This adds to the price of the goods at the other end, makes controlling the price level that much more difficult. But on shipments from South America to the U.S., WSA insurance rates are not nearly so high--in order not to upset OPA's price ceilings in this country. (Example: coffee from Brazil is charged a special government rate of 25-c- per $100.) But Brazilians think inflation for the goose ought to mean inflation for the gander.

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