HC Deb 18 July 1911 vol 28 c868

asked the President of the Board of Trade if he is aware that the officials of his Department are bound by a rule that only companies which, being otherwise eligible, have paid minimum dividends of five per cent. for five years preceding the date of their application, can be placed on the approved list for guarantee business; and, seeing this rule is so applied that a company which has earned 5 per cent. and distributed it in dividends, making no provision for reserve, is placed in a better position than a stronger company which has earned more than 5 per cent., but paid only 44 per cent., employing the balance in building up a strong reserve, will he consider a modification of the rule so as to have regard to the test of security afforded by earnings and reserves, rather than by the amount distributed?


Before an insurance company can be placed on the Board of Trade's approved list for guarantee business, it must comply with certain conditions which were carefully laid down by the Board of Trade many years ago. One of those conditions requires the payment by the insurance company in question of a 5 per cent. dividend for five consecutive years. Payment of a dividend at this rate does not, however, secure the admission of the company to the approved list unless satisfactory provision has also been made for reserves. I am sure that the hon. Member will recognise the necessity for some definite rule, and that he will agree-that the rule, so long as it remains in. force, must be applied to all companies alike. As at present advised, I see no-reason for a reduction of the minimum rate of dividend required.