§ [No. 15]
§ Clause 8, page 7, line 43, at end insert "and no company of which any such insurance company is a subsidiary".
§ THE EARL OF LIMERICKMy Lords, I beg to move, that this House doth agree with the Commons in Amendment 15. With the consent of the House, may I speak also to Amendments Nos. 16, 19 and 55. These four Amendments are directly related.
§ LORD DIAMONDWe have already taken Amendment No. 55 with Amendments 11 and 12.
§ THE EARL OF LIMERICKMy Lords, there is a small difficulty here, in that Amendment No. 55 and also Amendment No. 19 relate to two groups of Amendments. It is perhaps necessary to refer briefly to that in connection with each. The suggestion for the first Amendment, No. 15, came originally from the Institute of Chartered Accountants. The effect of this Amendment would be to prohibit an insurance company's holding company, as well as the long-term insurance company itself, from paying a dividend when an insurance company has an inadequate long-term fund. The Institute of Chartered Accountants' justification for the suggestion was based on the fact that a company could conduct its long-term business entirely through a subsidiary and thereby abdicate its legal responsibility for deficiencies in the insurance funds. We accept this as a fair point. As the beneficial owner, the holding company has at least a moral responsibility and should be required to hold any reserves under its control to rectify the position of the long-term fund until such time as its adequacy is restored. This does not necessarily mean a subvention from the holding company if the cause of the inadequacy is ephemeral. It does, however, provide a strong incentive for seeing that things are put right as soon as possible.
The second Amendment No. 16 is a drafting change and the third, No. 19, is 1568 consequential in part on the first Amendment. Its effect would be to make any default by the holding company in complying with the dividend prohibition (in relation to declaration of its own dividend) a further ground for the use against its insurance subsidiary of any of the intervention powers specified in Clauses 13 to 21. The rest of the Amendment is consequential to Amendment 17.
The last Amendment adds inter alia Clause 8(5) in subsection (3)(b) of the penalty clause, Clause 46, the effect of which would be to make any default by the holding company in contravention of the dividend ban an offence for which the maximum penalty would be a fine of £400. I beg to move.
§ Moved, That this House doth agree with the Commons in the said Amendment.—(The Earl of Limerick.)
§ LORD DIAMONDMy Lords, we should not let this go past without paying our tribute to the Institute of Chartered Accountants, notwithstanding the loyalties of the noble Earl, and indeed my own.