US history

The Beginning – our US roots

In 1835, Zachariah Allen, a prominent textile mill owner, made property improvements that would minimise the chance of fire loss. Although widely accepted today, the concept of loss prevention and control was virtually unheard of at the time. But to Allen, a proactive approach to preventing losses made good economic sense. After making considerable improvements to his mill, Allen requested a reduction in his insurance premium, but was denied. He called upon other local textile mill owners who shared his loss prevention philosophy to create a mutual insurance company that would insure only 'good risk' factories—known as Highly Protected Risk (HPR) properties today. Whatever premium remained at the end of the policy term would be returned to policyholders in the form of dividends. Today, our clients benefit from the company's favourable performance in the form of membership credit.

As Allen predicted, proper fire prevention methods, monitored by regular fire inspections for mill policyholders, resulted in fewer losses. But, despite its success, one problem remained: A single mutual insurance company could not withstand the financial cost of the loss of an entire plant. More capacity was needed, so in 1848, Allen formed another mutual insurance company, Rhode Island Mutual.

A Period of Expansion

Throughout the next 20 years, other mutual insurance companies were added to the group roster. Together, these companies and the ones that later evolved soon became known as the Associated Factory Mutual Fire Insurance Companies, or the Factory Mutuals, for short. The Factory Mutuals' loss record was enviable; losses were less frequent and less severe than those experienced by most other non-mutual insurers. Losses were examined to determine how they were caused and what could have been done to prevent them from occurring. Inspection teams even examined non-policyholder losses to help increase the Factory Mutuals' knowledge base. This vital loss information helped identify specific industry hazards and was essential to developing loss control recommendations for policyholders with similar occupancies. Such information was shared among all the Factory Mutual (FM) insurance companies, and was particularly critical to the inspection teams, which were staffed separately by each individual company. By 1878, the FM companies formed a dedicated unit to handle the collective inspection activities for all the FM policyholders. This unique group of loss control specialists initially provided just inspection services. The group later began performing appraisals and adjustments, loss analysis and research activities associated with preventing fire and other hazards—all to benefit the mutual insurance company owners and their policyholders. Today, all of these services remain integral components to FM Global in the form of engineering and research. Like today, the FM companies' main interests in the late 1800s and early 1900s remained focused on researching and developing products or techniques that would help mitigate property risks and advance the efforts of property conservation. In 1874, a revolutionary form of loss control entered the loss prevention scene: the fire sprinkler. While the invention was designed and later perfected by entities outside the FM realm, it was FM's support and promotion of the product that led to its eventual widespread use and acceptance.

The 20th Century

The beginning of the 20th century brought much change for the FM companies. Where once the mutual insurance companies focused primarily on the familiar business of textiles primarily within the Northeast region of the United States, new companies began to form that sought business beyond the traditional geographical boundaries.

These mutuals began branching out into other industries, such as shoe and rubber manufacturers, foundries as well as light, gas and power companies, while still maintaining their preference for HPR properties. During the next 75 to 80 years, the need for more comprehensive policyholder coverage grew, forcing a series of consolidations among the FM companies. By 1987, 42 separate mutual insurance companies had become three: Allendale Mutual Insurance Company, Johnston, R.I., USA; Arkwright Mutual Insurance Company, Waltham, Mass., USA; and Protection Mutual Insurance Company, Park Ridge, Ill., USA. The three separate organisations found it difficult to deliver competitively priced, value-added engineering services in a marketplace full of increasing competition and a demand for more challenging property protection programs. In 1998, the CEOs announced their intent to merge the three companies to create FM Global and by 1999 the merger was completed. This union enabled FM Global to leverage the considerable resources and talents of the three former entities to provide consistent, cost-effective and competitive products for its policyholders around the world.