but still suffered loss. I just wanted to get the comment of these gentlemen on that charge.

Senator LEHMAN. I want to thank you gentlemen very much. Before you get up, I want to say this: I think your testimony here was certainly very dramatic, and it's the same sort of testimony that we have been having at the other eight hearings we have attended. At one after another, groups of people came to us, just as you gentlemen have, and told us about their homes wiped out or damaged beyond repair without any recourse at all, without any compensation which would permit them to rebuild. It's the same pattern we have had in every one of the other States in which we have had hearings.

I am very glad indeed you came.

Mr. EDELSTEIN. Mr. Chairman, at this point I would just like to have inserted into the record, because this is from South Carolina, a communication from Mr. Gerbrand Poster, Jr., of Myrtle Beach, S. C., who describes some of his experiences at Myrtle Beach in defense of a proposal along the lines of that which has been discussed here. Senator LEHMAN. So ordered.

(The letter above referred to follows:)

Hon. HERBERT LEHMAN,

MYRTLE BEACH, S. C., December 17, 1955.

Chairman, Banking and Currency Investigation Committee,

Care of the State Capitol, Raleigh, N. C.

DEAR SENATOR: I regret that I am unable to be in Raleigh while you are conducting your investigations and therefore cannot offer to be questioned by your committee on the subject of disaster insurance.

Yet, having been through the experience of Hazel and during the current year having been threatened but not hurt by some more hurricanes, it has become most necessary for me to try to think up some ways in which our population can be protected against not only the danger of hurricanes, but, in general, against every possible kind of act of God contingency.

Permit me, at the outset, to explain that I in my thinking would prefer it if act-of-God insurance would be made available to the public by the people whose duty and business it is to do such things; to wit, by normal insurance companies. It is my personal belief and feeling that if the Federal Government does not have to enter into the fields of private business it would be better for everyone concerned. On the other hand, I believe equally seriously that if insurance cannot be bought from private industry, it is the duty of the Federal Government to step in and make such insurance available.

I believe that most every American would and does prefer to pay his waythat every American prefers to buy insurance if he so wishes for risks against which he wants to insure himself. I believe that most every American, while probably thankful for SBA and Red Cross help in case of need, still would consider it his inalienable right to buy rather than to receive gifts and/or assistance.

As such-and considering that private industry does not so provide this kind of broad act of God insurance-I believe that the Federal Government now should provide it for those who need and/or want it.

I also believe that it would be a relatively simple matter to(1) Set up the machinery.

(a) Use one of the existing instrumentalities now operating in Wasuington, or preferably set up a small subagency within the Department of the Interior, to be specifically charged with writing the policies, etc.

Congress stop set up (or establish) a basic fund for payments of losses and which fund is to be one which is in reserve only. In other words, the Treasury can arrange that, when needed, that insurance agency can immediately daw funds from the Treasury for a maximum of the initial fund as arranged. (This figure should be sufficiently high so that in case of real disaster, the fund can stand behind its policies.)

All premiums paid in to go into that fund with the understanding that conceivably the Treasury's guaranty, at some future date, may not any longer be required.

(2) Arrange for policies, premiums, collection, and disbursements.

In

(a) The policy which is written (and sold by the insurance agency) is to be in the simplest form imaginable. It should provide insurance against all such claims as cannot be covered by commercial insurance policies; without further detail mentioned so that there cannot be misunderstandings. order to forestall litigation, the clause should only include the term and words that insurance which can be bought outside the buyer's (or insured's) normal habitat but which is not normally sold within the insured's habitat (or State) is considered for the purposes of this policy as unavailable to the insured.

The policy to be sold should be sold in a simple, nontechnical manner. All licensed insurance agents should be declared agents; their commission should be small and while probably not remunerative, still would be adequate in that this insurance would actually help them sell other insurance. The amounts of each policy should be kept simple and in rounded off terms. For instance in $1,000, $2,000, and up by $1,000 policies.

The insured has the right to buy what he feels he needs and/or wants. He does not have to buy full coverage; but if he does not buy that then in case of damages the payments would be prorated.

If desired, the policy should be made available on a noncancelable basis for a specified number of years. For instance an insurance company making a mortgage loan for a period of 12 years, should be in the position to demand that the mortgagor take out this insurance for a specified amount, and for the duration of the loan period. If that is arranged in this way, every mortgagee will support the program, across the Nation.

The secret of the success of a program like this, is to have nationwide coverage. Dangers are also nationwide, but in many instances (where during several years no disasters have occurred) individuals as well as others, tend to minimize the possibility of any disaster. Yet, hurricanes endanger not only the coastline, but equally much the interior of the country. Floods occur everywhere, as we do other types of wind-driven waters and/or rising waters. None of these are now insurable.

In case some form like this could be worked out, the amount of initial guarantee would be more or less-at best-be a happy guess. For argument's sake, we might assume that a Treasury guarantee of $1 billion, should be sufficient. The Treasury should be recompensed for providing this guarantee, even while the funds are not being used. If so, the interest to be paid on such guarantee can be the very minimum possible (e. g., one one-hundredth of 1 percent) when not used; such moneys as are used to be rated at the normal interest rate at which the Government borrows (and/or sells its debentures)). The operating of the fund can and should be kept inexpensive. In the general scope, the cost of this feature ought to be not more than one one-hundredth of 1 percent also. Agents' commission for the sale of the insurance to the public should be not higher than 5 percent of the premiums collected.

The main portion of the premium would be the sums desired and/or required to build up within the shortest possible time, that agency's own capital through premium collections.

With a risk running of $1 billion, an annual receipt (before payment of losses) of $50 million would mean that the premium can be as low as about 51⁄2 percent (or lower).

I have written the above in a sincere spirit of trying to help you in your task and if I am successful even to the smallest degree, it will be pleasant to have done so.

Respectfully yours,

GERBRAND POSTER, Jr.

Mr. EDELSTEIN. The next witness is Mayor Middleton, of Long Beach, N. C.

Senator LEHMAN. Have you a prepared statement?

STATEMENT OF E. F. MIDDLETON, MAYOR, LONG BEACH, N. C.

Mayor MIDDLETON. No, sir. I will just talk without it.
Senator LEHMAN. Present your case.

Mayor MIDDLETON. I know the beach from its beginning in 1938 and until Hurricane Hazel in October 1954. We had no reason to

worry about hurricane insurance. We had nearly 400 houses, approximately 400 houses, and all of them were destroyed overnight. Senator LEHMAN. How many houses?

Mayor MIDDLETON. More than 300. Close to 400 houses. Most of those houses were owned by people scattered all over North Carolina, all types of people, and they owned homes down there. Some of them rented part of the time and had them for their own use part of the time.

It was a thriving community and overnight it was wiped out.

The insurance companies I thought did very well. We had no tidal insurance, and we can't get it. They sent in adjusters there and gave us a fair adjustment I think, as far as it went. But everybody wants the insurance. I think we have shown that by everybody who has been up here today.

When it comes down to the form of the insurance, the Federal Government will have to underwrite it or guarantee it some way.

I think it should be possible to work it out along the lines of the old warrisk insurance. I think you would find all of them willing to pay for it. What it would cost I guess there's no way to determine until it has been in effect for a number of years. But the idea would be to fix it so that a man could build a cottage or a home or a small business on the coast and get insurance to cover his loss if any.

I would think that the old-line insurance companies that are writing insurance now could cover their part. This other insurance could come in for that that was not covered by the old-line companies.

For instance, on the property that was destroyed by Hurricane Hazel, the adjustment was based from 40 percent to some of them that got 100 percent of the face of their policies. In my particular case I got about 61 percent of the insured amount.

All right. If the Government could come in there with this other insurance and give me the other 39 percent, if the insurance I was carrying was good for 61 percent of it, then why not get this other insurance for the gap in there?

Senator LEHMAN. I am not quite sure I followed you on that. Mayor MIDDLETON. Mr. Lehman, I had insurance I thought all the insurance you could get, the comprehensive liability and all. All right. I got 61 percent of the amount of my policy. The insurance company acknowledged that as being that much wind damage, I suppose. I believe, as it was brought out here earlier today, the companies may not be so liberal on the next hurricane. That was the first one we had ever had down in there. I don't think we had had one similar to that hitting in that particular area in 60 years.

So if this new insurance could take up where the old companies leave off-in other words, I'm insured. I'm carrying all they will write, comprehensive, liability, wind, and fire.

Senator LEHMAN. Was that 61 percent of the value of your house? Mayor MIDDLETON. Yes.

Senator LEHMAN. Did that cover wave insurance?

Mayor MIDDLETON. No, there was no wave insurance. That was the argument that the wind may have caused 61 percent of the damage.

Senator LEHMAN. I see.

Mayor MIDDLETON. The remainder was caused by water, wave wash. So I was only entitled under their adjustment to the 61 percent.

What I am trying to say is this thing we are trying to get worked out here is an insurance company that will guarantee the man the value of his property if it is destroyed and let him pay for it as nearly as he can. It may be subsidized, but, on the other hand, it just might not. He might carry that insurance along for 60 years without any damage from wave wash.

It had been approximately 60 years since there had been any wave wash on that particular beach. I think a number of years ago they had wave wash in Florida. And last spring they had the wreckage in the New England States. It may be another 60 years before we have a hurricane again, or we might get one next summer. If a man can get insurance on his property and be assured of collecting that insurance, let him pay for it as well as he can, but fix this rate and carry it along.

Senator LEHMAN. May I ask you just for my own information— and if you don't want it in the record you don't need to have it-the rate you paid on your insurance on your house?

Mayor MIDDLETON. Well, sir, I just don't have it before me. I just don't have the information. I know very little about insurance. But it seems, from what I've been reading about this insurance since we started studying this thing, that the insurance came down from the old marine insurance written way back there in 1100 A. D. The English companies seemed to think of complete coverage, whereas the American companies that came forward pretend to write in these restrictions and only insure for one thing, and instead of getting complete coverage this country only writes coverage for those items named.

I would think that we should have something very similar to the war-risk insurance, and I'm not so sure that it shouldn't cover manmade disaster also, because I think that's coming, a coming necessity. I don't see why they shouldn't set it up now and set it up in a way that can make use of the present insurance companies and all the information they have, along with all of their agents, which the old war-risk insurance did do. Make use of them, use their machinery as it's set up, and put this thing under some Government agency, perhaps Civil Defense, who would know more about the disaster than anybody else. I mean they would certainly be the first line on any disaster. That would be my idea.

Senator LEHMAN. These pictures, of course, are very graphic. Was this an island?

Mayor MIDDLETON. Was it an island? No, it was no island. A peninsula.

Senator LEHMAN. A peninsula?

Mayor MIDDLETON. Yes.

Senator LEHMAN. Had you had anything of this sort in previous years?

Mayor MIDDLETON. No. As I say, from legend, the same thing happened about 60 years ago, in 1897 I believe. But at that time I don't think there were any buildings on that particular beach. This beach was started in 1939. Until we had this hurricane I think we had had a total of three small fires on the beach. We had 1 or 2 shingles ruffled by the wind. I do think that that $50 deductible might be a good idea because it would eliminate a lot of useless work. Senator LEHMAN. I see. This is the ocean, I assume?

Mayor MIDDLETON. There's the ocean. Here's the peninsula in here. Here's a small low place. There's a fresh-water ditch down here. You cross over that and then you hit higher woods, a hill. This is actually

Senator LEHMAN. Here's the ocean.

Mayor MIDDLETON. Oh, you have the beach there?

Senator LEHMAN. Yes. Here's the ocean on this picture. What's on this side? Is that mainland?

Mayor MIDDLETON. Yes, mainland.

Senator LEHMAN. Are these bays in here? I see now.

Mayor MIDDLETON. The whole of the beach is all an island. It's an island that is quite high.

Senator LEHMAN. I would like to have this made available in the record.

(The pictures referred to appear on pp. 882 and 883.) Senator LEHMAN. Any questions, Mr. Edelstein?

Mr. EDELSTEIN. No.

Senator LEHMAN. Mr. Rogers?

Mr. ROGERS. No.

Senator LEHMAN. Mr. McKenna?

Mr. MCKENNA. No; I have none.

Senator LEHMAN. Thank you very much, Mayor.

Mr. EDELSTEIN. The next witness is Mr. J. H. Farrell, executive secretary of the Southeastern North Carolina Beach Association.

STATEMENT OF JOHN H. FARRELL, EXECUTIVE SECRETARY, SOUTHEASTERN NORTH CAROLINA BEACH ASSOCIATION

Mr. FARRELL. Senator Lehman, members of this committee, ladies and gentlemen, our association has been in existence for 10 years. Ours is a promotional organization. We promote tourist trade, sport fishing, commercial fishing, and other factors having to do with the development of southeastern North Carolina.

Our area covers from the South Carolina line, from Calabash, to Swansboro, a distance of 150 miles. Of course, the coast of North Carolina has a shoreline of 320 miles.

Immediately following Hurricane Hazel, General Griffin and Governor Hodges asked me to start making surveys of the damage. I think I covered 42 beach resorts, fishing villages, and recreational communities.

After Hazel it took considerable time, about 4 months, to complete estimates of private and public damage in that territory.

Then in August 1955 through September 19, three more hurricanes. Mr. Pat Riley, an engineer from the Department of Conservation and Development on loan to the State civil defense, and I, after each one of the three hurricanes, made the same surveys. Both of us have talked to thousands of people at all of these 42 places. Those folks who received damage, both wind and water or wave wash, I can assure you are for some form of water insurance.

Most of them, like myself, would like to see the private companies handle it, but if not, they certainly would like to see the Federal Government do something about it from an economic standpoint.