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Risk and Insurance History

"Catastrophes" in Early Twentieth Century America

John Bogardus | December 1, 2005

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Black and white photo of firefighters spraying building with water

The first decade of a new century seems to usher in a series of cataclysms for the United States and its citizens. Acts of international terrorism and unusually devastating hurricanes head the list of American catastrophes for the opening decade of this century. However, the first years of the twentieth century also brought their own set of devastating events, which stimulated the nation's insurance industry and business leaders to respond in turn.

The early 1900s saw a series of extraordinary catastrophes. In September 1900, the booming Texas port city of Galveston was largely destroyed by a hurricane that killed over 5,000 people and dislodged the city from its position of commercial prominence. Civic and business leaders responded by championing the construction of a 17-foot-high sea wall, which ran for almost 8 miles. Galveston's grade was likewise raised proportionately to the wall's height.

In 1904 a German-American church group in New York chartered the paddlewheel steamboat General Slocum for its annual picnic on Long Island. When fire broke out in a forward cabin, years-old life jackets crumbled, and lifeboats wouldn't budge from their cradles. As fire spread aft, the ship ran aground, its bow aflame and its stern in deep water of the notoriously swift-moving East River. Frantic passengers crowded the decks; faced with death by fire or water, many jumped with their clothes aflame and drowned, to later be washed ashore. The death count reached 1,021; the captain was jailed for safety violations.

Conflagrations in the 1900s

Fire insurance accounted for most agent and broker revenues in the early 1900s. Huge conflagrations occurring ever more frequently were widely reported and boosted interest in coverage. Individuals and commercial enterprises were increasingly receptive to fire insurance.

Chicago's 1903 Iroquois Theater fire on December 30 claimed 602 lives. The tragedy led to much more stringent theater safety codes in the United States as well as all over the world. Less than 2 months later, a great conflagration in Baltimore consumed 80 blocks, producing a staggering financial loss. Even though many of Baltimore's buildings were stone or brick and considered fireproof, the city's business center was destroyed with losses of $70 million to $90 million (of which some $50 million was insured). Firefighting assistance was sought from as far away as New York City, but to little practical purpose because the outsiders' hose couplings did not fit Baltimore's hydrants and hoses. Hydrant and hose couplings were subsequently standardized as a result.

The San Francisco earthquake of 1906, which measured 8.3 on the Richter scale, caused destruction for 400 miles. It destroyed thousands of buildings. Its carnage and astronomical dollar damage were caused by gas mains that exploded and stoves that collapsed to spark fires, which roared through the city for 4 days, burning almost unchecked because water mains broke too. Still, insurance covered about half the estimated losses and provided some $200 million to start rebuilding a magnificent city on California's great bay.

Understandably, the San Francisco earthquake commanded worldwide press coverage and stunned Americans with a new sense of their vulnerability. More than 28,000 San Francisco buildings were destroyed, half of them residential. Approximately 5,000 were steel, stone, or brick; most others were made of redwood. Nearly 700 people were dead or missing, and another 300,000 were left homeless. Estimates of losses ranged between $350 million and $400 million; only an estimated $180 million to $235 million was insured, with U.K. underwriters responsible for $40 million.

There was much haggling over coverage terms. Some policies covered fire only, but others included seismic shock. Thirty-seven insurers assessed stockholders $32 million to meet liabilities. The INA and its recently established Alliance Insurance Company paid over $4 million in claims. Fireman's Fund Insurance Company stated it was the first major insurer to survive such massive destruction in its home city. It paid half its claims of $11.2 million in company stock and assessed shareholders $300 per share.

Responding to a New Century

Despite such cataclysmic events, the insurance industry was able to respond to the diverse requirements of an increasingly prosperous county. In the second decade of the century, with more than 500,000 people driving cars, Charles Kettering's electric starter was being introduced to replace the hand crank, and a new process was invented to improve refining oil into gasoline. That same year, the Aetna L&C pioneered an auto policy that combined liability, property, and fire coverages, a forerunner of multiline policies.

Various coverages were also developed to meet other specific needs of the day such as wind and tornado insurance. While available much earlier, this coverage became especially popular among farmers. Hail insurance was widely marketed by 1914, and crop protection became available by 1919. Rain insurance was initially written in 1920. The first rain policy insured a rodeo in Dewey, Oklahoma. The event was rained out, and the Hartford Fire Insurance Company paid the $2,000 claim.

Additionally, employee benefit programs began to receive national attention. Early in the second decade, Montgomery Ward adopted the first group accident and sickness policy. Shortly thereafter, the Equitable Life Assurance Society issued the first group life policy to the Pantasote Leather Company of Passaic, New Jersey.


As our industry struggles to come to terms with the challenges of contemporary disasters, we would be well served to remember that history has important lessons to teach us about how our forebears responded to the threats and opportunities of the early twentieth century. In light of the growing scrutiny of insurance and the public's increasing skepticism about our commitment to their welfare, an appreciation of our historic role in the country's social and economic development is indispensable.

Robert Moore has worked with Jack Bogardus for a quarter of a century. Mr. Moore worked for Alexander & Alexander from 1977 to 1995 and served as a senior vice president of Alexander & Alexander Services Inc., as well as chairman and president of A&A Government and Industry Affairs Inc. In 1985 he was elected president of the National Association of Insurance Brokers, and from 1989 to 1993 he served as chairman of that organization's Past Presidents' Advisory Council. He has written and spoken extensively on corporate issues. As The Conference Board's emerging issues coordinator, he identified and responded to the business community's public policy concerns. He is coauthor of School for Soldiers: West Point and the Profession of Arms, which was selected as a New York Times "Noteworthy Book." Mr. Moore earned a bachelor's degree from Davidson College, a master's degree from the University of North Carolina, and a doctorate from the University of Wisconsin. Commissioned a U.S. Army officer, he taught at the Military Academy at West Point and was an associate professor on the graduate faculty at the University of Maryland. Jack Bogardus and Robert Moore are coauthors of the award-winning Spreading the Risks: Insuring the American Experience (2003) and the revised edition (2005). He can be reached at 703-759-0233 and through the website

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