In 1835 Connecticut's Eliphalet Terry assumed leadership of a small Hartford insurance firm. Within one year, and with one master stroke, he turned the city of Hartford into the insurance capital of the world.
Terry's career in insurance began in 1810. That's when a group of investors formed the Hartford Fire Insurance Company. Just a dozen men with a relatively simple idea.
That idea propelled them to modest success. Then, when disaster struck in New York City, Eliphalet Terry made an extraordinary gesture that brought the insurance industry to Hartford.
Insurance existed in Hartford and elsewhere for many years, with marine insurance the most prominent product. Ship owners sending their vessels abroad would insure them. The China Trade minted millionaires, and insurance provided, for a small fee, a hedge against disaster.
But the men in Hartford saw a simpler risk to insure against: Fire. Businesses frequently contributed to fire brigades, which protected buildings threatened by fire. The Hartford Fire Insurance Company, along with many other companies, formalized this system. It accepted premiums, paid fire brigades for protecting insured properties and spent to replace buildings lost to fire.
Fire brigades competed in major cities. The first brigade arriving at a building had the right to fight the fire and claim payment from insurers. It seemed a fairly safe gamble.
In all, the founders of the Hartford insurance company put up $15,000 (10 percent of its capital). They borrowed the rest to show that it could pay any losses.
Hartford Insurance Finds Early Success
In the early years, the business prospered. Losses were controlled, with none reported for the first two years of operation. Premiums rolled in, and the company operated with virtually no overhead. Its treasurer drew a salary of only $300. But he also got another $30 for firewood to heat his office.
Shares in the company were valued as high as $100. But as the company matured, its problems multiplied. Losses were incurred, premiums were mispriced, competition grew and the business became more complicated. The Hartford Fire Insurance Company was no longer the moneymaker it had been. Its owners found they were now on the hook for the company's liabilities. Some owners offered to sell shares for as little as $5 to someone willing to take on the risk.
The group originally chose Eliphalet's uncle Nathaniel, a mayor of Hartford and congressman, as president. By 1835, the insurance company struggled, and a full reorganization was under way. Eliphalet Terry, originally only a minor investor, became president of the Hartford Fire Insurance Company.
The large investors still included David Watkinson and Daniel Wadsworth. Watkinson's fortune would eventually underwrite the Watkinson Library at Trinity College. Wadsworth would build the Wadsworth Atheneum.
For twelve months Eliphet aggressively worked to right the Hartford insurance company. As the year wound to a close, Eliphalet Terry prepared to celebrate a successful transition. Losses were minimal and the company was to declare a dividend. The company's directors held a dinner to celebrate on a cold December night and went home to warm beds.
Trouble in New York
In New York City, December of 1835 turned brutally cold. The East River froze solid and temperatures dropped as low as -17 degrees. On the night of December 16, a gas line broke and the leaking gas then came into contact with a wood stove. That resulted in a warehouse fire in the heart of the Wall Street financial district.
The rapidly growing city lacked adequate fire fighting resources, and the cold aggravated the situation. Firefighters had to chop through frozen fire reservoirs and the river to pump water toward the fire only to have it freeze inside the fire hoses.
Block by block the fire spread out of control. The stock exchange, the merchants exchange, post office, two churches, major banks, warehouses and dry-goods facilities all fell to the fire. The fire's glow in the sky was visible as far away as Philadelphia.
The marines ultimately resorted to using dynamite from the Brooklyn Navy Yard to blow up buildings in the fire's path to stop its spread. By the time firefighters controlled the blaze, it destroyed between 500 and 700 buildings. Remarkably, only two people died.
In the early morning light the scope of the devastation became clear. But then another shock hit the city. One by one its insurance companies began shutting their doors and refusing to discuss claims.
News Reaches Hartford
In Hartford, the news of the fire caused shock. The excitement over the Hartford Fire Insurance Company's great year gave way to doubt. The fire did more than $20 million worth of damage. But the Hartford was relatively insulated, facing exposure of about $60,000.
Eliphalet Terry summoned the company directors. They would stand by their insurance policies. They also told their bank they would personally guarantee any company checks written for the damage to policy holders in New York.
In a great show of salesmanship, Terry ordered up a sleigh and raced toward New York City. With the city's financial district in ruins, Terry proclaimed to all who would listen that his firm, the Hartford Fire Insurance Company, would stand by all claims.
To those not fortunate enough to have Hartford insurance, he offered the chance to buy it. When the fire's damage was finally totted up, 23 of New York's 26 insurance companies would declare bankruptcy. The center of the insurance industry then headed to Hartford.
Thanks to: The Memorial History of Hartford County, Connecticut, 1633-1884, Volume 1 by James Hammond Trumbull.
This story about Hartford Insurance was updated in 2019.