§ [No. 14]
Clause 8, page 7, line 42, at end insert—
(5) For the avoidance of doubt it is hereby declared that money from a fund maintained by a company in respect of its long term business may not be used for the purposes of any other business of the company notwithstanding any arrangement for its subsequent repayment out of the receipts of that other business.
§ THE EARL OF LIMERICK
My Lords, I beg to move that this House doth agree with the Commons in Amendment No. 14. Clause 8 provides that long-term business assets only be applied may for the purposes of the long-term business, except when and to the extent that an actuarial investigation discloses a surplus. Subsection (1) contains the essential provision, to protect the long-term policyholder, that the assets of the long-term business may be applied only for the purposes of the long-term business. It has been suggested that the clause does not make it clear beyond doubt that a loan from the long-term business funds cannot be made to the general insurance business side of a composite company or for the purpose of any non-insurance business carried on. The new subsection removes any doubt on this point.
I am not suggesting that this type of arrangement, commonly referred to as an inter-class loan, is improper in every conceivable circumstance, but it is prima facie undesirable that long-term fund money should be used, for example, to support an ailing motor insurance business carried on by the same company. Subsection (3) provides a mechanism whereby problems of liquidity as distinct from solvency can be handled. In exceptional circumstances the Secretary of State 1567 could also consider an easement under Clause 38.
§ Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)