ASSURANCE COMPANIES BILL. (Hansard, 19 February 1946)

LORD PAKENHAM
My Lords, I beg to move the Second Reading of this Bill. I will ask your Lordships' permission to move rather rapidly across this subject, because, if ever a Bill was an agreed Bill, this Bill falls under that heading. It is a Bill that has been agreed upon between all the political Parties, or shall I say, all the main political Parties. It has been agreed with the insurance companies. It passed through another place with only the smallest Amendments. In fact everyone is already agreed upon it except your Lordships, and I hope you will agree upon its principles in a very few minutes.
Its main object is to underline the stability and security of the British insurance market which is second to none in the world, and it is my privilege, before coming to the Bill, to repeat what the President of the Board of Trade said in another place, that the Government have no intention of interfering with the transaction of insurance business by private enterprise save to the limited extent to which insurance at home may be affected by the existing proposals relating to personal social insurance and industrial injuries. I feel it is as well to make that 679 plain again in this place. It is the desire of the Government that in the future, as in the past, insurance should be dealt with on an international basis. It is worth reminding the House that the profit accruing to this country from our insurance business done on behalf of clients overseas is of the order of £20,000,000 a year, so that we can see it was a very substantial business bringing great benefits to this country.
The very high reputation of the British insurance companies and Lloyds is, of course, well known to you all, and the present Bill is directed merely to remedying the two principal difficulties which manifested themselves between the two wars. In the first place, some most important categories of insurance business are for the first time brought within the ambit of the Insurance Companies Act by Clause 1 of the present Bill. I refer to marine, aviation and transit insurance business. And, secondly, by virtue of the provisions of Clauses 2 and 3 of the Bill steps are taken to prevent the forming of mushroom companies and also to enable the Board of Trade to step in at an earlier stage than is now possible with a view to preventing insolvency.
At present, as many of your Lordships will be aware, the companies who are subject to the provisions of the principal Act have to make annual returns to the Board of Trade, and in addition they are required to deposit with the Supreme Court certain sums, usually amounting to £20,000, or, in the case of motor vehicle insurance, £15,000. This system of attempting to provide security through deposits has never been satisfactory, a point upon which all the main investigating committees are agreed. Therefore I will take first the prevention of the emergence of mushroom companies. Under Clause 2 the Bill before us provides that in future no person shall carry on in Great Britain assurance business of a class to which the principal Act as now amended applies, except an incorporated company which has a paid-up capital of not less than £50,000. That is a point I would like to stress very strongly. In the future a company will have to have a paid-up capital of £50,000.
Coming now to the maintenance of solvency once a company has started, the Bill before us, in Clause 3, alters the 680 definition of insolvency for an assurance company by providing that an assurance company doing general business shall be deemed unable to pay its debts if the value of its assets does not exceed the amount of its liabilities by whichever is the greater of the following amounts, namely, £50,000, or one-tenth of the general premium income of the company in its last preceding financial year. So in future in order to be regarded as solvent by the authorities a company must have assets which exceed liabilities by £50,000 or by one-tenth of the general premium income for the last preceding financial year, whichever is the greater. This provision to which I have just referred is to be enforced within two years from the passing of the Bill in the case of an existing company and within two years from the commencement of operations by a new company. As you can well imagine, the general object of Clauses 2 and 3 taken together is to prevent failure from occurring at all.
I should add that the system of deposit, which, as I have mentioned, was so unsatisfactory in the past, is now rendered unnecessary, and Clause 4 accordingly abolishes them altogether. I do not think at this stage I need detain you further except to say that great importance is attached to this Bill in insurance circles, and the Government very much hope you will give it a Second Reading forthwith. I beg to move that the Bill be read a second time.

§ LORD WOOLTON
My Lords, I will not detain you for more than a moment, but I should like to say that on this side of the House we welcome this Bill. It is a Bill which has been on the stocks for quite a long time. I have heard something about it in other than Parliamentary quarters, and the insurance companies of repute in the country welcome it. There has indeed sometimes in the past been great hardship inflicted on innocent and perhaps not very intelligent people who have thought that they have insured themselves against various risks and have then found the companies that have offered them most attractive rates have not been quite so good when the unhappy time of calamity came. This Bill, in the provisions that it makes for the protection of 681 the public against insolvency, I think is something that we should welcome. I am very glad to have the opportunity of supporting the Bill.

§ EARL HOWE
My Lords, I only want to ask the Minister in charge of the Bill one question. He mentioned motor insurance as being one of the things affected by the Bill. Can he tell us whether the effect of the passage of the Bill is likely to increase the premiums paid for motor insurance or not?

LORD PAKENHAM
I am afraid that is a question of which I would like notice. I should imagine that a nice calculation would be required, and I will not offer an opinion on it now, but at the Committee stage perhaps there will be an opportunity of asking the question again.