§ Mr. Deakins
I beg to move Amendment No. 7, in page 9, line 30, at beginning insert:'This subsection applies in any case.
Mr. Deputy Speaker
With this it will be convenient to take Government Amendments Nos. 8, 9, 10, 11 and 12.
§ Mr. Deakins
These amendments are all linked. Basically, Amendment No. 7 concerns Clause 12 which requires the Board to refer to an independent actuary any long-term policies of a company in liquidation which it considers may provide for excessive benefits. As the clause stands, the actuary's recommendations for any scaling down of excessive benefits are to be binding on the Board.
The effect of these amendments is to transfer from the independent actuary to the Board the ultimate responsibility for determining whether, and, if so, by how much, any excessive benefits are to be disregarded or reduced. An amendment with this purpose in mind was moved in Committee and had been asked for by the professional body—the Institute of Actuaries. My hon. Friend explained at the time that the drafting of the amendment was unsatisfactory but accepted the argument in principle behind it and promised to move appropriate amendments on Report. I hope that these amendments will meet with the approval of the House.
§ Mr. Tim Renton
When this Bill came forward many of us were surprised that Clause 12, as originally drafted, bound the Board to accept the actuary's recommendation. Not only was this surprising in itself, but it did not fit in with Clause 16(8) where, in the case of a company in financial difficulties, the Board asks the actuary to assess whether there have been been disproportionate benefits and is then free to take the actuary's advice if it so wishes.
1869 Clause 12 has now been brought into line with Clause 16. I have no doubt that hon. Members on both sides who served on the Committee will feel that the clause now reads better and makes much better sense than it did originally.
It is clear that an actuary should be used in a case such as this to make a professional judgment whether the benefits are excessive, but such a judgment must, by definition, be subjective. An actuary has to form a view on the future rate of inflation, for example. In the case of a guaranteed income bond, excessive benefits one year may not be excessive in another year when the rate of inflation changes. It is appropriate that, when the actuary has made his report, the final decision should be left with the Board to decide whether it wishes to follow the actuary's advice in toto.
Earlier, my hon. Friend the Member for Faversham (Mr. Moate) referred to the Board being brought to life only by the kiss of the Secretary of State. If the Bill had been left as originally drafted and the Board had to follow the advice of the actuary without using its own general knowledge of the insurance business, then indeed it could have found itself to be a very weak instrument. That would have been a disservice to people in the insurance industry whom the Government would wish to ask to serve on the Board. We are pleased to support these Amendments.
§ Amendment agreed to.
§ Amendments made: No. 8, in page 9, leave out from beginning of line 40 to end of line 2 on page 10.
No. 9, in page 10, line 2, at end insert:
'(2A) In any case to which subsection (2) above applies the Board may determine in the light of any recommendation contained in the actuary's report that the liability or benefit to which that recommendation relates shall be treated as reduced or disregarded for the purposes of section 10 and 11 above; and where the Board so determine the liability or benefit in question shall be treated as reduced or (as the case may be) disregarded accordingly for the purposes of the application of section 10, of any provision of subsections (3) to (7) of section 11, or of any provision of any regulations made under subsection (10) of section 11 above (as the case may require) in relation to the policy in question. '
§ No. 10, in page 10, line 3, at beginning insert 'This subsection applies'1870
§ No. 11, in page 10, leave out lines 16 to 18.
No. 12, in page 10, line 18, at end insert:
' (3A) In any case to which subsection (3) above applies the Board may determine in the light of the value indicated in the actuary's report that the value attributed to the policy in question for the purposes of the claim in respect of the policy in the winding up shall be treated as reduced for the purpose of calculating the sum payable to the policyholder in accordance with subsection (9) of section 11 above; and where the Board so determine the value so attributed to the policy shall be treated as reduced for that purpose accordingly. '—[Mr. Deakins.]