HL Deb 27 July 1939 vol 114 cc624-36

Order of the Day for the Second Reading read.

3.45 p.m.

THE LORD PRESIDENT OF THE COUNCIL (VISCOUNT RUNCIMAN OF DOXFORD)

My Lords, I seek your leave to move the Second Reading of the War Risks Insurance Bill. This Bill is part of the emergency legislation which is necessary at the present time to bring the machinery of Government up to date and to enable us to fit the necessities of today on to the machinery of twenty-five years ago. The old War Risks Insurance Agreement was one which had been worked out between Government officials and the representatives of the shipping industry before we were within sight of the Great War of 1914. The shipping interests themselves had in existence their mutual war risks associations, which had worked with complete smoothness, very largely because those who were in control of those associations were masters of the art of insurance and had foreseen the troubles that were likely to arise before they were visible to other people. But even an agreement reached, like that of 1914, between the Government representatives and those who represented the Chamber of Shipping and the various mutual war risks associations in course of time proved to be inadequate, and there are some respects in which it is necessary that changes should be made.

In the first place there has been a considerable change in the area of the risks to be covered. The risks reinsured in 1914 were defined in the agreement as: the risks of capture, seizure and detainment by the King's enemies and the consequences thereof or any attempt thereat, and all consequences of hostilities or warlike operations by or against the King's enemies whether before or after declaration of war. In the revised agreement the asks reinsured have been defined in relation to the clause which is current practice in the marine insurance market and which takes account, among other things, of the fact that there may be or may not be a formal declaration of war. The risks reinsured under the revised agreement are: the risks of capture, seizure, arrest, restraint, or detainment by the King's enemies and the consequences thereof or any attempt thereat; also of the consequences of hostilities or warlike operations by or against the King's enemies whether there be a declaration of war or not; but excepting civil war, revolution, rebellion, insurrection and civil strife arising therefrom and piracy. It will therefore be seen that there has been an alteration in the area over which this scheme is to work.

Under the 1914 agreement ships were held covered under their current peacetime policies (which were issued without payment of premium) for ten days after the outbreak of war if they were in port, or if they were at sea until arrival at the last port of destination for which they had cargo or passengers on board at the outbreak of war and for ten days thereafter. If such port became unsafe during the ten days they were at liberty to move to another port and were held covered for ten days after arrival at a port which was a "safe port" at the time of arrival and remained a "safe port" for ten days thereafter. The altered conditions to be contemplated in a future war have rendered the "safe port" provision inappropriate, and in the revised agreement references to a "safe port" have been eliminated. Ships in port are held covered for seven days from the issue of an "emergency notice" by the Board of Trade, and those at sea are held covered until arrival at the last port for which they have cargo or passengers on board at the time of the issue of such a notice and for seven days thereafter.

"Emergency notice" is defined in the agreement, and it will be seen that the revised agreement provides not only for the contingency that hostilities may begin without a formal declaration of war, but also for the possibility of the giving of notice to terminate reinsurance without premium before an actual outbreak of hostilities. The third point in which there has been a change since the operation of the 1914 agreement is that the 1914 agreement provided that when Great Britain was at war ships should comply with the orders of His Majesty's Government and the directions of the committees of the associations as to routes, ports of call and stoppages. The revised agreement requires compliance with these orders and directions as from the issue of the Board of Trade emergency notice."

The next point to which I would draw the attention of your Lordships is that of valuation. This has always been a matter of controversy, but under the 1914 agreement ships were accepted for purposes of reinsurance at the values at which they were entered in the associations for war risk purposes on the outbreak of war. This provision—that is to say, the values which were entered in the association for war risk purposes—was necessary because the agreement was negotiated only on the eve of the outbreak of war and no opportunity had occurred for the provision of alternative insurance facilities. It was a condition of the agreement, however, that entered values applied only until September 9, 1914. Thereafter the value of ships for purposes of Government reinsurance was limited to first cost less depreciation at the rate of 4 per cent, per annum, subject to a minimum value of 30s. per ton gross.

Under the revised agreement which we are now considering the basic value of cost less 4 per cent. per annum has been maintained, and this basis of valuation will apply both as regards voyages current on an outbreak of war and also subsequent voyages. A provision has, however, been added to permit of additions to the value at which a ship may be entered for purposes of Government reinsurance where alterations or additions have been effected, the first cast of which is equivalent to not less than 20 per cent. of the first cost of the vessel. This change is rendered necessary by many examples of the reconstruction, extension or improvement of vessels, often at very high cost, completely transforming their nature. The agreement now suggested will permit of the insurance of values over and above the Government scale value, but any such "excess values" so placed will not rank for Government reinsurance. As in the case of the 1914 agreement, provision is made whereby the insured values of all vessels for the purpose of the agreement may be increased or diminished by agreement with the Board of Trade at any time after the outbreak of war. It will be seen therefore that these changes, although not material, have in fact been rendered necessary by the experience of past times and must now be made in war to bring the agreement up to date.

May I point out the objects of the Bill? They are defined in the documents just circulated to your Lordships' House. The object of Part I of the Bill is to give the Board of Trade the power, with the approval of the Treasury, to operate the comprehensive scheme of marine war risk insurance referred to by the Chancellor of the Exchequer on January 31 of this year. The Bill will empower the Board of Trade to enter into agreements for re-insurances against King's enemy risks of British ships and cargoes carried by ship or aircraft. In anticipation of these powers the Board of Trade have already made arrangements with certain mutual war risks associations of shipowners in the United Kingdom, under which the associations will continue their present practice of insuring ships registered in the United Kingdom against all war risks, and the Board of Trade will reinsure the associations in respect of claims arising from King's enemy risks to a ship so insured up to 80 per cent. of the value of the ship, as determined under the arrangement.

The proposed powers will also enable the Board of Trade to conclude with the marine insurance market an agreement for affording improved facilities for the war risks insurance of cargoes destined for discharge in, or shipped from, the United Kingdom, including cargoes shipped ocean-wise between ports of the United Kingdom. It will be remembered that this agreement was put into operation on a provisional basis on April 13 last. Under this agreement the market, through the medium of a War Risks Cargo Pool, grants full war risks insurance cover to traders, and the Board of Trade reinsures the Pool in respect of King's enemy risks. The new scheme provides that the Board of Trade shall receive a specified portion of the premiums charged by the market for comprehensive war risk cover, and the market undertake, on their side, certain obligations in regard to the maximum rates of premium to be charged to traders, and agree to modify in the interests of the trading community, certain of the conditions of insurance which were customary before April 13. The Bill also empowers the Board of Trade to effect direct insurances of British ships, and of cargoes carried in ships or aircraft against war risks or King's enemy risks at any time when it appears to them that reasonable and adequate facilities for such insurances are not otherwise available, and it gives the Board of Trade full powers to effect insurances of ships and cargoes in war-time. These are the objects of Clauses 1 and 2, forming the first Part of the Bill.

The second Part of the Bill is designed to make provision for the protection against King's enemy risks of stocks in the hands of manufacturers, producers and traders, so as to enable trade to be carried on in a normal manner, and to prevent the risk of stocks in peace time being unduly depleted through the absence of any war risk cover. Such a provision is a necesary corollary of the scheme for marine risks insurance, as it is not sufficient to make provision for the insurance of goods on their way to this country if there is not equivalent protection for them after they are warehoused on arrival. This will cover all goods, whether home produced or imported.

I would point out that these provisions extend to ships under construction for sale, but do not cover fixed property or plant, and for the simple reason that the figure which would have to be covered by insurance of fixed property comes to the prodigious one of about £10,000,000,000. The total figure to be covered on ships, large as it is, is only £250,000,000. On cargoes and goods in transit it is £130,000,000, making a total, when ships are included, of £380,000,000. Part II of the Bill deals with the insurance of commodities estimated at £2,000,000,000, making a grand total of £2,380,000,000. These prodigious figures are small compared with the figures attributable to fixed property, buildings and machinery and furniture, which come to the enormous figure of £12,000,000,000. It is only fair to say that the Government considered, with great sympathy, the request which has been made to make schemes for the insurance of buildings and fixed plant. They were unable, with these examples before them, and figures on such a gigantic scale, to justify or agree to the inclusion in this Bill of buildings, including private houses and property, but a strong case was made out in argument, and the Government have agreed, as I think was announced in your Lordships' House on July 17, that a conference of four or five gentlemen of acknowledged standing will confer, and they will be asked by the Government "to examine the practicability of evolving a scheme for mutual provision against risk of war damage to fixed property in private ownership, excluding ships, cargoes and commodities already covered by the Government's insurance scheme." The names of these gentlemen will shortly be made public, and then I hope it will be possible for a much closer examination to be made of the facts which must govern any scheme of this nature.

Power is taken in Clause II to exclude goods of any description, that is to say, to exclude goods which are not deemed to be a necessity for the life of the community. It is intended that the measure shall apply to retailers as well as to wholesalers, and that there should be a minimum premium. Clause 7 provides that in war time the Board of Trade may, with the approval of the Treasury, put into operation a scheme enabling goods of the kinds in question held in the United Kingdom to be insured against King's enemy risks on payment of a premium. How is this portion of the insurance scheme to be worked? Clause 8 provides that the owners of insurable goods shall be enabled on the passage of this Bill to register them in times of peace on payment of a registration fee, assessed in accordance with the Schedule which appears at the end of the Bill. By such registration they will be assured of indemnity if war breaks out, but will be under obligation to pay the appropriate insurance premium for the initial period of war.

Both registration in peace and insurance in war are to be optional. Power is, however, taken in Clause 9 to make insurance of goods in war time compulsory, should that course appear to be desirable. Compulsion would be applied by Order, which would provide that no trader should be compelled to insure unless he owned stocks of a minimum value. Power is also taken in the event of such an Order being made to prescribe different rates of premium in relation to different descriptions of goods, and according to the place at which and the circumstances in which the goods are situated. Clause 10 provides that while a war risk insurance Order is in force no person shall issue policies of insurance covering the same ground except as agent of the Board of Trade. In other words, it becomes a State monopoly which nobody else wishes to undertake.

I have drawn attention to the various features of this Bill, but I need hardly say that it is one of considerable complexity to those who are not closely acquainted with what is called "the market" and the mutual insurance system under which shipping has been provided with cover for so many years. The reason why it is necessary to have an insurance scheme of this kind at all is a very simple one. There would be the risk on the outbreak of war or of hostilities of vessels making for the nearest port for shelter, and not completing their whole voyage. They would wish to avoid the risk of capture. The general purpose of this scheme is to ensure that at times of emergency, there shall be no such inducement, and that ships shall not be laid up and commerce shall not be interrupted because reasonable and adequate facilities for war risk insurance are not available. It is to fulfil these requirements that this Bill has been introduced. I beg to move.

Moved, That the Bill be now read 2a. (Viscount Runciman of Doxford.)

4.2 p.m.

LORD STRABOLGI

I believe I am right in saying this is the first time the noble Viscount has addressed your Lordships since he had a regrettable illness, and I should like to be allowed to congratulate him on the recovery he has made and the good results of the sea voyage he took. May I first of all raise a legal matter with the noble and learned Lord on the Woolsack? It seems to me that the time has come when the Lord Chancellor should set up one of his famous legal Committees to determine whether some different phraseology is not called for instead of using the term "King's enemy risk." The noble Viscount explained that the Bill is so drawn that risks are insured against arising from hostile action when there is no declaration of war. I may be entirely wrong, and I approach this matter with the greatest diffidence in the presence of the Lord Chancellor, but it seems to me that these conditions have certainly altered. We have seen hostilities in China and Albania without any declaration of war at all—in the case of China considerable hostilities on a very large scale, which have now entered on their third year. Indeed, it is apparently the new technique to engage in war on a large scale without a declaration of war, and I imagine one of the reasons is to avoid coming under the effects of certain neutrality legislation in America. At any rate it seems to me that the old definitions, so well understood and well accepted by insurers and shippers and others, do not quite cover the situation under modern totalitarian methods. I do not ask the Lord Chancellor to say anything on the matter now. I have given him very scant notice that I was going to raise this, but it has been conveyed to me that difficulties might arise over this definition question.

THE LORD CHANCELLOR (LORD MAUGHAM)

My attention has been called to the fact that there is a definition in Clause 6, page 7, line 6. I am not sure whether that does to some extent meet the noble Lord's criticism.

LORD STRABOLGI

I read that, and it certainly is very wide. It deals with rebellion, revolution, civil war and civil strife, but I do not think the undeclared act of war is covered. That is not civil war, it is not rebellion, it is an act by a sovereign State without a declaration of war.

THE LORD CHANCELLOR

Has the noble Lord seen paragraph (b)?

LORD STRABOLGI

Yes—"action taken by an enemy, or from action taken in combating an enemy." On the other hand, who is your enemy without a declaration of war? As I say, it may be perfectly clear to the Lord Chancellor and the Admiralty Court, but I suggest that it needs looking into under modern conditions. However, that is a matter about which I do not pretend to have any knowledge.

With regard to the Bill itself, we of course do not wish to impede it in any way. It is necessary, and the case is well understood. Our complaint is that it does not go far enough. I must revert to the matter touched on by the noble Viscount—namely, the omission of insurance for lieges of their private property. We have this situation: the shipowner is insured as to his hull and cargo, the merchant or storekeeper in certain cases is insured, but the man who has his whole property in his house or buildings cannot get insurance in any direction at all, and that is causing a great deal of anxiety to many small householders particularly, and other persons. The noble Viscount on behalf of the Government quotes the astronomical figure of the whole value of the real estate and hereditaments of this country, and says, "How can we shoulder the possible risk of £12,000,000,000 or some such figure?" That is not what is suggested, and never has been suggested, by my Party. We say it should be mutual, and possibly later on it may be found that the Government have to under-pin it or support it, and invite all the property holders to contribute to a pool. After all, insurance is mutual; in the beginning it was a purely mutual concern. That is all we ask at the present time. There are thousands of property owners—I am one in a small way myself—who would be glad to pay into a general pool. If their houses are destroyed now they would get nothing. The Government says, "Oh yes, you would be all right when the war was over." The war may last a very long time, and there are always claims and adjustments to be made. It means that the poor man is unable to build another house, or get compensation, for a considerable time; whereas the shipowner—I do not blame the noble Viscount for looking after his own cloth—the shipowner who loses his hull gets another ship at once.

I want some better provision for the householder. The Government says, "Oh, yes, we realise that there is a large body of opinion which holds these views, and there is a General Election coming along perhaps, so we must do something." So what do they do? On July 17 they announced the appointment of a Committee of four or five eminent business men. Well, where are the Committee? This is July 27, and they have not even been chosen. In a few days' time the recognised holiday season will have commenced. These four or five eminent business men have not been chosen. Are they then going to scatter to Scotland or Derbyshire during August for the holidays, and nothing done until we reassemble at the end of September? Really the matter is more urgent than the Government seem to appreciate. And I most respectfully suggest that it is not nearly so complicated as the Government have made out. In the meantime there is great anxiety and dissatisfaction among many worthy people, who feel apprehensive. As the noble Viscount knows, the building industry is at the present moment very hard hit, because of this very difficulty. People have had these war alarms now for so many months that they are afraid to embark on new building enterprise, and until the Government do something there will be that difficulty. I do hope this matter is going to be hastened because Parliament is rising in a few days and we have not even got the names of the Committee. The noble Viscount has a great reputation for administrative ability and energy, if he will allow me to say so. He has always been regarded as one of the quick movers in politics. Cannot he put a little ginger into this matter, and get a scheme before the unfortunate property owners as soon as possible?

4.11 p.m.

VISCOUNT RUNCIMAN OF DOXFORD

My Lords, I do not know whether the noble Lord expects me to reply. This is a matter that has received a great deal of attention. It is not so simple as the noble Lord would make out. One set of facts was skated over very lightly. He made no reference to premiums. I presume he is going to try and collect some revenue in a scheme of this nature.

LORD STRABOLGI

Yes.

VISCOUNT RUNCIMAN OF DOXFORD

Then may I point out the difficulty into which he would tumble? He would either make that premium too high and therefore a burden on the simple householder, or make it too low and therefore penalise the State. I leave him to get out of that dilemma. We should be foolish if we were to embark on anything so complex, so varied, so difficult of solution without a full examination of the various conditions which must apply to any scheme of this nature.

LORD STRABOLGI

I will get the noble Viscount out of that difficulty immediately. All that property owners are asking is that they should get their share of whatever goes into the pool. You can make the premiums high or low; it is immaterial.

VISCOUNT RUNCIMAN OF DOXFORD

That is all very well. It is no comfort to the householder if it is unfair to him in the effort to make it fair to the State. I think my noble friend would get into difficulties at once. At all events there is no reason why we should decide, in dealing with anything so stupendous as this problem undoubtedly is, without much greater care and closer scrutiny. I do not know whether my noble friend expects me to say anything more on the subject, but twice in this House and in another place statements have been made on behalf of the Government pointing out that they are ready, willing, and anxious to get to the bottom of this problem if they can. But we must be in the position of having the data before us, and we seek for the advice of those who, quite impartially, with no interest at all—not even shipowners—will be ready to set down a solution of what is an extremely difficult problem.

4.14 p.m.

VISCOUNT CECIL OF CHELWOOD

My Lords, if the noble Viscount will allow me to say so, I am still a little puzzled. The only argument my noble friend gave in his first speech was that the sum was so very large. That means the danger to the individual is very large also. Why should we protect the shipowner or the owner of goods because he is risking less, and leave unprotected the owner of private property because he is risking a great deal? I should have thought the larger the risk the more reason there was for the State to intervene to help to meet the threat to a very large proportion of the community. No one doubts that the thing is complex. It is obviously a very complex and difficult question. On the other hand, why is it more difficult than the other part of insurance against war risks? I do not see any greater complication in the one case than in the other. The difficulty of premium arises in any form of insurance. Why should it only be insuperable, or nearly insuperable, in the case of the owners of private property? I confess I am a little puzzled, and I hope the noble Viscount will give us some hope that the matter is to be pressed on with more rapidity than at the present moment because time is getting on.

VISCOUNT BERTIE OF THAME

My Lords, the possibility of war has existed for many months, and therefore I cannot see why His Majesty's Government have not taken the best advice to know what premiums are proper to pay.

4.16 p.m.

LORD HUTCHISON OF MONTROSE

My Lords, I do not know what answer my noble friend will give to the noble Viscount, Lord Cecil, on the question he raised regarding the insurance of property, but, as I understand this Bill, it is a Bill to enable the means to be given in time of war to replace both shipping and goods which are necessary to the community, whereas buildings can well afford to wait until the end of the war. It seems to me and those who had something to do with it in the last War that that was the main reason why this Bill was drafted.

VISCOUNT CECIL OF CHELWOOD

My Lords, the difficulty was not that at all. The difficulty in the last War was that the whole resources of the country were engaged in dealing with the actual fighting, and therefore there was no one left to build ships. You will not get over that by insurance. That is a totally different matter. Replacement is not provided for in this Bill, only the payment of money to enable you to replace.

LORD HUTCHISON OF MONTROSE

Exactly—that is the reason for this Bill,

On Question, Bill read 2a, and committed to a Committee of the Whole House.