Responsibility for the actual procurement of aircraft and aircraft motors rested at all times, as has been pointed out, in the War and Navy Departments. In the War Department the service in charge of this work was the Signal Corps. It seems to be established that either this service failed to meet the responsibility resting upon it, or a mistake was made in throwing upon the same service responsibility for both the procurement and the operation of aircraft. To meet this latter consideration the President by an executive order dated May 20, 1918, issued under the authority granted to him by the Overman Act of the same date, completely reorganized the Air Service and provided for the distribution of the duties of the Signal Corps among a number of distinct services.

By this order the original duties of the Signal Corps, as a service in charge of military signalling, were carefully segregated from those pertaining to aviation operations. The former were placed under the immediate direction of the Chief Signal Officer of the Army, and the latter were entrusted to a new service known as the Division of Military Aeronautics, under the direction of a Director of Military Aeronautics to be selected and designated by the Commander-in-Chief of the Army. At the same time provision was made for a new "executive agency" designated the Bureau of Aircraft Production which, as set forth in the order, should have "full, complete and exclusive jurisdiction and control over the production of airplanes, airplane engines and aircraft equipment for the use of the Army.' This Bureau, it was provided, should be in charge of a Director of Aircraft Production, to be appointed by the President, who should at the same time be Chairman of the Aircraft Board created by the Act of October 1,

1917, and who should discharge his duties under the direction of the Secretary of War.

Major-General William L. Kenly was appointed chief of the new Division of Military Aeronautics, and John D. Ryan, Director of the Bureau of Aircraft Production. Later, in August, 1918, Mr. Ryan was appointed Second Assistant Secretary of War, and placed in general charge not only of the services headed by him, but of the Division of Military Aeronautics as well.

There can be no question regarding the great improvement from the organization standpoint resulting from this order. At the time of the cessation of hostilities most of the troubles that had interfered so seriously with the carrying out of the ambitious airplane programme of the Government had been largely overcome, and airplanes and airplane motors were being produced in quantity and shipped to our army and our allies in France. In the meantime our deficiencies had been met, in part at least, by drawing upon the production resources of France and England.

CHAPTER XV

WAR-RISK INSURANCE

The Bureau of War-Risk Insurance in the Treasury Department Its functions as defined by legislation Marine war-risk insurance -Act of September 2, 1914, and its amendments - Mariners' insurance- -The War Risk Insurance Act of October 6, 1917 — Allotments to dependents of soldiers and sailors Allowances to dependents of soldiers and sailors Compensation and indemnity of soldiers and sailors for death or disability- Voluntary insurance of soldiers and sailors against death or disability Scale of operations of the Bureau of War-Risk Insurance.

Although not the most important, from the standpoint of its direct bearing upon the prosecution of the war, the legislation providing for the establishment and activities of the Bureau of War-Risk Insurance in the Treasury Department is in other respects one of the most remarkable and interesting pieces of social legislation produced by the war.1 This legislation covers a number of distinct features which, although more or less closely related, require separate consideration in order that their character may be clearly understood.

Conditions under which the business of marine transportation is carried on render it imperative that all vessels engaged in such business and their cargoes shall be insured against loss prior to clearing on each voyage. On the outbreak of the war in Europe the increased danger of loss due to mines and the activities of the . belligerents' submarines made it evident that private

1 For a more detailed account of the functions and operations of the Bureau of War-Risk Insurance see, in this series, Samuel McCune Lindsay Government Insurance in War Time and After.

insurance companies would either refuse to write in-surance against risks due to these causes, or in order to protect themselves would charge rates so high as practically to prohibit voyages taking vessels through the war zone. To meet this situation Congress, by an Act approved September 2, 1914, authorized the Government itself to enter this field and to write insurance of this character. The need for this action is tersely set forth in the preamble of the Act, which reads:

Whereas the foreign commerce of the United States is now greatly impeded and endangered through the absence of adequate facilities for the insurance of American vessels and their cargoes against the risks of war; and

Whereas it is deemed necessary and expedient that the United States shall temporarily provide for the export shipping trade of the United States adequate facilities for the insurance of its commerce against the risks of war: fore, etc.

There

This Act provided for the establishment in the Treasury Department of a Bureau of War-Risk Insurance which should have the function, subject to the general direction of the Secretary of the Treasury, of making provision "for the insurance by the United States of American vessels, their freight and passage moneys and cargoes shipped or to be shipped therein against loss or damage by the risks of war, whenever it shall appear to the Secretary that American vessels, shippers, or importers in American vessels are unable in any trade to secure adequate war-risk insurance on reasonable terms." By an amending Act approved June 12, 1917, the Bureau of War Risk Insurance was authorized, with the approval of the Secretary of the Treasury, to make provision for the reinsurance of vessels of foreign friendly flags, or their cargoes, when such vessels or

their cargoes were insured by the Government of any country which is at war with an enemy of the United States, and to reinsure with the Governments of any such countries American vessels and their cargoes. The authority of the Bureau to write marine insurance was still further extended by an amending Act of July 11, 1918, which authorized the Bureau to insure vessels of foreign friendly flags, their cargoes, etc., when such vessels were under charter or operated by the United States Shipping Board or a citizen of the United States, and the cargoes to be shipped in such vessels, whether or not they were so chartered or operated, whenever the Secretary of the Treasury found that such vessels were unable to secure adequate war-risk insurance on reasonable terms.

The Bureau, with the approval of the Secretary of the Treasury, was authorized to adopt forms of warrisk insurance and fix the premium rates that should be charged, which rates should be subject to modification from time to time in accordance with the experience of the Bureau. Although not so provided in the law, the theory was that these rates should be such as would compensate the Government for all losses so far as they could be so established without unduly restraining vessels from engaging in necessary overseas trade. To assist the Bureau in the formulation of its insurance policies and in the adoption of a table of premiums the Secretary of the Treasury was authorized to establish an advisory board of three members skilled in the practices of war-risk insurance. Finally, the President was authorized to discontinue this system at any time when in his judgment the need for it had passed away, and in any event to do so within two years, or in accordance with the terms of the amending Act of July 11,