§ 4.38 p.m.
§ LORD MANCROFT rose to move, That the Insurance Contracts (War Settlement) (Finland) Draft Order, 1954, be approved. The noble Lord said: My Lords, the two Motions standing in my name on the Order Paper are concerned with the same principle, and that, I hope, is an uncontroversial one. I propose, with your Lordships' permission, to discuss them together. The Insurance Contracts (War Settlement) Act, 1952, enables Her Majesty, by Order in Council, to give effect to certain Agreements relating to insurance contracts which were in operation prior to the outbreak of war. Two such Agreements have been made so far, one with Finland on December 28, 1949, and one with Italy on June 1, 1954. In both cases, the insurance provisions which are annexed to the Agreements were drafted and agreed by the British and foreign insurance markets concerned. These provisions appear in the Schedules to the Draft Orders in Council which are to give them legal effect in the United Kingdom. The Finnish Government have already given legal effect in their country to the insurance provisions of the Finnish Agreement, and the Italian Government have undertaken to take similar action in respect of the provisions of the Agreement with Italy.
§ The broad principle of both Agreements is that direct contracts of insurance 597 in operation at the outbreak of the last war between an insurer and insured should remain intact, but that contracts of reinsurance then in operation should be treated as terminated at that date. Reinsurance differs from direct insurance in that, whereas under an insurance contract a person obtains from an insurer protection against loss or damage, under a reinsurance contract an insurer obtains from another insurer protection against certain of his liabilities under his direct contracts. Your Lordships may possibly be familiar with this process in its simpler name of "laying off" If a reinsurance or treaty of reinsurance is cancelled, the insurer may remain responsible for larger particular risks than would ordinarily he considered prudent; but, being professionally engaged in the business, he is generally in a position to obtain a fresh reinsurance cover. A private individual with, say, Finnish or Italian interests, on the other hand, is in no such position, and may be subject to ruinous loss if, contrary to his expectation, the insurance contract on which he relied has been abrogated by the war. The contracts which are maintained will not cover loss due to belligerent action by the forces of either country. This follows the settled rule of English law on the point.
§ The law in regard to the effect of war on insurance contracts is by no means clear and differs from country to country. In the interests of insurers and insured alike, it is desirable that any legal doubts should be removed without unnecessary recourse to litigation. What is more, the United Kingdom is the world's foremost international insurance market, and it is important that our insurers, who transact a considerable insurance business with Europe, should continue to hold their own on the Continent. The British insurance interests are to be congratulated on the part which they have played in the negotiation of these Agreements. The making and implementation of Agreements such as these is important for the maintenance of an atmosphere encouraging to future business. It is hoped that Agreements with other countries will shortly he made. As I say, these two 598 Agreements are not controversial, and I hope that they will meet with your Lordships' approval. I beg to move the first Motion standing in my name.
§ Moved, That the Insurance Contracts (War Settlement) (Finland) Draft Order, 1954, be approved.—(Lord Mancroft.)
§ 4.43 p.m.
§ LORD LUCAS OF OHILWORTH
My Lords, how refreshing it is that after the noble Lord's noble friend has given away the rights and privileges of so many of this country's citizens, the noble Lord, Lord Mancroft, should be asking us to pass an Order which will to some considerable extent financially benefit this country! I congratulate the noble Lord on that. I also congratulate him on being so modest, because at least he gave the credit for these very difficult negotiations to the British insurance industry—and quite rightly so. I think the noble Lord will agree that insurance is a most valuable invisible export, which brings into this country a substantial amount of foreign currency. The noble Lord need have no fear that we are going to raise the slightest objection to this Motion. We hope that he will be able, and that the British insurance industry will be encouraged by the Board of Trade, to effect similar arrangements widely throughout Europe, and indeed wherever they can be conducted in any other part of the world. We congratulate the industry and we congratulate the noble Lord on bringing some slight breath of fresh air and hope to us after having allowed his noble friend really to put us into the depths of despondency.
§ On Question, Motion agreed to.