UNITED KINGDOM APPLICANTS (Hansard, 6 April 1981)

§ Mr. Eyre
I beg to move amendment No. 5, in page 5, line 11, after 'means', insert ', subject to such exceptions as may be prescribed by regulations under the 1974 Act,'.

§ Mr. Deputy Speaker
With this it will be convenient to take Government amendments Nos. 6, 7 and 28.

§ Mr. Eyre
One of the innovations in the Bill, to which I referred on Second Reading, is the requirement that the more important underwriting agents of a general business insurance company—the "main agents"—be fit and proper. I suggested then that I had in mind that the threshold beyond which an underwriting agent became a "main agent" should be 10 per cent. of the company's general business premium income.
Clause 7 provides at present for the dividing line between "main agents" and others to be laid down by regulations. In Committee I stressed that I considered it important for this boundary to be drawn in primary legislation and that I would table an amendment on Report.
These amendments fulfil the undertakings that I gave in Committee. They establish the basic rules for determining whether an underwriting agent is a main agent. Simplifying somewhat, an underwriting agent will be a main agent in any financial year either where his authority to enter into contracts on behalf of the company 738 exceeds 10 per cent. of the premium income of that company, as determined by the schedule, or where that authority is without limit.
This latter provision is important, since it blocks an obvious loophole. But, as I explained in Committee, there are many well-established agents who, whilst they have no limit to their authority, clearly operate on too small a scale to prejudice the solvency of an insurance company. I accepted that for insurance companies to have to revise the authorities of large numbers of such agents would involve expense and inconvenience. I undertook to seek an effective way of dealing with the problem.
I should like to explain how these amendments meet this objective. In Committee I suggested that it might prove possible to use the commencement order under clause 37 to exclude these small existing agents or, alternatively, that an amendment could be made to clause 7. Further consideration has led to a different approach.
Amendment No. 5 allows for exceptions from the basic rules to be prescribed by regulations. Work on the detailed amendments being proposed on this clause have shown that it is a difficult area, and it would be a pity if a rushed provision on the exception for existing agents were to prove ineffective. The provision is to be used to relax the constraints imposed by the general rule, not to tighten them. I can give the House a substantial indication of what the broad content of those regulations is likely to be. The intention is to except an existing agent with an unlimited authority at some specified date other than where that agent has written business accounting for more than 10 per cent. of the company's gross premium income in the year covered by the last set of accounts submitted to the Department or where in any subsequent year the agent exceeds the 10 per cent. limit. The details of these regulations have yet to be worked out, including the date to be specified. There is no intention to require insurance companies to research their records of business written by underwriting agents for years back. Nor will there be any question of making retrospective the application on the requirements. We need to define appropriately the scope of the exemption from future requirements. Of course, there will be the usual full consultation with the industry when the proposed regulations have been drafted. I believe that this will prove to be the best way of dealing with this aspect of the matter.

§ Mr. Clinton Davis
Again, I am sure that the Minister is right on his further reflections on this matter. It is appropriate for the matter to be dealt with in this way rather than in the way initially proposed by the Department. In Committee the Minister was frank enough to say that he would follow this route rather than the initial route presented to him.