Dáil Éireann debate -
Wednesday, 23 Jun 1926

Vol. 16 No. 15

IN COMMITTEE ON FINANCE. - LOCAL AUTHORITIES (MUTUAL ASSURANCE) BILL, 1926—SECOND STAGE.

MINISTER for LOCAL GOVERNMENT and PUBLIC HEALTH (Mr. Burke)

I move the Second Reading of this Bill. It has been initiated by the General Council of County Councils, who have been unanimous in favour of the introduction of a measure on those lines, and to that extent it is not purely a departmental measure. It has been apparent for a considerable time that the system under which local authorities insure their property against fire risk in this country is extravagant, and in other respects not altogether satisfactory. It is not an easy matter to collect figures showing the risk ratio for property of local authorities, but such figures as can be got indicate pretty clearly that the risk ratio for the property of local authorities is very much lower than that of other property. Researches along those lines have been made by the General Council of County Councils, and they go to show that the risk ratio of the property of local authorities in Ireland only amounts to 7 per cent., whereas the normal rate for ordinary property is 55 per cent. I cannot stand absolutely for those figures, but I believe they are substantially correct. On the other hand, as regards the position of insurance companies, they are not altogether pleased with the existing arrangements either. Competition for the business of local authorities, owing to the fact that the risk ratio is so low and also to the fact that the securing of such business is a kind of advertisement for the company, is very keen between the different companies. The result is that so much money has to be expended in paying the salaries and travelling expenses of canvassers that it is a moot point whether this business is worth securing at all. Some authorities on insurance in this country are of the opinion that this business does not pay companies even at the very favourable premiums that exist at present.

Early in the present century a similar state of affairs existed in Great Britain, and local authorities in that country were also paying unnecessarily high premiums when the relatively small risk involved is taken into consideration and also the complete absence of moral hazard. In that country certain individuals very much interested in local government, realising the state of affairs that existed, determined to correct it by forming an association of municipal authorities which would arrive by experiment at the arithmetically correct premium and insure its members at that premium. As a result of their efforts the Municipal Mutual Insurance Company, Limited, was incorporated in 1903, as a company limited by guarantee and not having a capital divided into shares.

That company has been an unqualified success. Since its establishment premiums have been reduced in Great Britain and a reserve fund established from which loans are made to the local authorities in Great Britain at low rates of interest. The new system was applied to the employers' liability insurance in 1918. The General Council of County Councils has been for some years examining the position in Saorstát Eireann with a view to establishing here a body on the lines of the British company and with the same advantages for local authorities. Their efforts have been hampered by one difficulty which did not affect the British company. Since the inception of the latter the Assurance Companies Act, 1909, was passed requiring large deposits by companies not in operation when the Act was passed. The only exceptions made by that Act are in respect of associations the purpose of which is wholly or mainly the mutual assurance of their members. The Government has been advised that, as the law now stands, local authorities cannot become members of such an association, so that before such a company can be formed in Saorstát Eireann it would be necessary to make a very heavy deposit which it is not in a position to make. Accordingly, if we are to make it possible for a company with those advantages over local authorities to come into existence it is necessary to pass some such measure as this.

The main object of this Bill is to enable local authorities in Saorstát Eireann to become members of mutual assurance companies and to exempt such companies from making deposits in the same way as other mutual assurance associations are exempted. Restrictions are placed on the nature of a company to which the Act applies by Section 2 of the Bill, in order to secure that the bona fide objects of the company should be mutual assurance by local authorities and that private persons should not obtain personal advantages or profits from its operation. The local authorities are themselves to promote and direct the company through members or officers appointed by them for the purpose, and may pay subsistence and travelling allowance to their nominees. It is as well to point out that the Bill leaves it at the entire discretion of the local authorities to promote or belong to such a company. Unless they are satisfied with the advantages they gain and the security they enjoy they need not become or continue as members. Any company, therefore, formed under the Bill must stand or fall on its merits. The Bill enables companies of this kind to be formed but does not ask the Oireachtas to approve of any such company or make it difficult for a local authority to refuse to join.

Mr. WILSON

We are favourably impressed with the necessity for this Bill. By its means constructive effort can be made by local authorities to reduce expenses in connection with fire insurance. The Minister has explained the working of the Bill, and to ratepayers and farmers anything that will give relief and lessen expenses is naturally very acceptable. The general body which is more or less acting on behalf of the ratepayers, in this case the General Council of County Councils, are the people who brought pressure on the Minister to bring in this Bill, or rather, he has facilitated them in the formation of a mutual assurance system. I have not sufficient knowledge at my disposal to venture on the expression of an opinion adverse to the principle involved. But having regard to the success which has attended a similar movement in Great Britain, we believe it is a Bill we ought to support.

Mr. HEWAT

I am sorry that I cannot support the last speaker in his approval of the principles of this Bill. The Minister for Local Government takes responsibility for this measure, although he has to some extent disclaimed responsibility by saying that he is introducing the measure to meet the wishes of the local authorities who are in favour of setting up a mutual assurance company to cover their own property. The principle that underlies this Bill is, I think, absolutely unsound. There is no reason why any body of people should not co-operate in their own interest, if it is in their own interest. But here we have the Minister for Local Government advocating that the ratepayers should practically leave their property uninsured. The basic principle of insurance is provision for contingencies that may not arise. The foundation of the whole principle lies in the capital which is provided to meet those contingencies if they do arise. The insurance of property by a company, or a number of individuals, without anything to fall back upon in case of loss by fire or loss through the operations of unemployment insurance, is a perfectly unsound principle, from every point of view. A person who takes a risk of that sort is, of course, only courting disaster. The proposals in this Bill are that the various local authorities should join together to insure their own property. If this scheme is in operation to-morrow, if there is nothing to fall back upon, and if a valuable building is burnt, involving a loss of hundreds of thousands of pounds, is it proposed that the ratepayers should bear that loss, simply because there is no provision made to meet it.

A document has been circulated by the promoters of this proposal in which they make much of the fact that an insurance movement of this sort has accumulated in England, after twentyseven years' working, a sum of £225,000. In the first place, assuming that the departure in England has been a success, we must recognise that insurance, which is based on large numbers and large values, is different in Great Britain, which has a great number of municipal undertakings, from what it is in the Saorstát. To build up a fund of any proportions in connection with the insurance of property which would come within the purview of this organisation would take a very long time here. In the meantime, the risks are very considerable. Take the value of the property which, it is indicated, may come under this Bill. No insurance company would take that risk. It is only a large combination of insurance companies that would take the risk. The largest insurance company in the world would not undertake the insurance that will be offered this association, which is without any backing or security, without distributing it amongst other companies. That is the practice and it is a prudent precaution.

I think that a Bill of this sort is in the nature of a Private Bill. It is really Private Bill legislation, rather than public legislation. A proposition of this sort ought to be examined by a Committee on Private Bill lines. Then, insurance companies are required to deposit £20,000 before they can operate in the Saorstát. That is quite a reasonable requirement, but it has had the effect of driving a good many insurance companies out of the country, because the amount of their business here did not justify the lodgment of £20,000. If a private company is bound to safeguard the interests of its customers by depositing this amount, surely the same provisions should apply in the case of any other association engaging in the same work. Why is an exception made? What is the difference between municipal or other authorities joining together for the purpose of insurance business and a private company carrying on the same class of business? It does not seem to me that it is right that this House should extend preferential treatment to an association of this class as contrasted with a business organisation. I do not think it is wise that legislation should take that form. The companies carrying on business here have certain expenses to bear. Should they be put in the position of having their business jeopardised by legislation favourable to an association of persons carrying on exactly the same work? The Bill deals very lightly with the question of risk. It says nothing about re-insurance, and the Minister is silent about re-insurance likewise. We can only assume, therefore, that the different authorities are going to take their own risk and are going to provide for the building up of reserves from premiums. That is all right if everything goes well. We are told that the premiums payable to the insurance companies will go into the ratepayers' pockets. That ignores the risk which is incurred in the meantime. It is not a novel proposition at all. There are many cases in which the same sort of thing has been in operation and in some they have proved very expensive to the people concerned. After all, insurance business does not consist in merely taking in premiums and having nothing going out. As a matter of fact, all general experience is that in insurance it is laborious business to build up reserves. A great many companies have failed to carry on for very long, but, generally speaking, the risk covered by policies has now been reduced to a fine art. It is a question of averaging losses over a certain period of years.

On the other hand, at any particular time companies may be called upon to face exceptional losses owing to exceptional circumstances. They have provision made in the matter of reserve and capital to meet contingencies for which there is no provision in the Bill before us. I ask the House to consider if that is sound business. It may be very attractive to Deputy Wilson to think that we are going to stop paying premiums and that, instead, we are going to put the money in our own pockets. But is that business? Is there any risk? It may be easy to put the money in one's pocket but it is not easy to keep it there. The Government tax collector comes along and takes the lot of it. I do not want to make any special point about this Bill. If it is considered that this is a form of legislation which is proper for the Minister for Local Government to bring in, well and good. But remember it is going to form a precedent. I say, firstly, it is unusual, and if I am told that it is not unusual, then I come to a second point and ask: Is it desirable? The Minister may say it is a matter for the local authorities, and if they are prepared to take the risk he is prepared to sanction it. I would advocate sufficient grandmotherly legislation to prevent any such scheme coming into operation without due and proper consideration of what the project really means. The whole question does not seem to me to be a sound insurance proposition unless you have a reserve to fall back upon in the event of loss. It is the negation of the principle of insurance altogether.

AN CEANN COMHAIRLE

resumed the Chair.

Mr. HEWAT

Then we come to the question of the £20,000 which insurance companies are required to lodge before they can operate in the Free State. This Bill aims purposely at getting over legislation already passed by the Dáil providing that any company, before it can carry on insurance business in the Free State, must deposit £20,000. Do the circumstances in this case justify the nullifying of that legislation? I venture to say the Minister has not made out a case and I do not think that the Bill, on the face of it, makes out a reasonable case for the powers which it proposes to give to local authorities in connection with insurance.

Mr. HEFFERNAN

The main basis of the opposition of Deputy Hewat to this Bill is that it is going to take money from the existing insurance business, as a business, and transfer that money to the pockets of the ratepayers.

Mr. HEWAT

I think that is a misrepresentation. I never said such a thing.

Mr. HEFFERNAN

The implication is that Deputy Hewat is opposed to this Bill because it is not in conformity with the business usages of the country —because it is not going to continue to put premiums into the pockets of the shareholders of the insurance companies. I say it is going to save the ratepayers money that they would otherwise have to pay. Deputy Hewat is very concerned about the neglect of the £20,000 deposit which insurance companies are bound to put up before they can start to do business. It should not be necessary for me to point out to Deputy Hewat that the reason that this reserve fund is in existence is that there may be a certain State guarantee that the people who insure will obtain payment for any losses they may incur from fire or any other risk against which they have insured.

Why should a reserve fund be necessary in this case? Have we not the best assurance of the payment of losses in the ratepayers themselves, the assets of the local authorities and the rates? We may have great respect for business interests, but business men have no right to have a monopoly of profit-making and to deny the rights to public bodies to combine mutually and to cooperate to effect savings. It has been clearly shown in the circular issued by the General Council of County Councils that a project of this kind in which thirteen local authorities in England were concerned has proved a very great success, and has resulted in very considerable savings to them. They have built up a very large reserve fund in the comparatively short time since they started. Undoubtedly the premiums that they pay are less than the premiums paid to insurance companies. By means of mutual assurance local authorities will be able to save a great deal of expense which insurance companies are obliged to incur in order to keep their interests before the people. A large amount of canvassing has to be done by their agents. When the insurance of the property of any local authority becomes open, canvassing is carried on by representatives of the different companies, and evidently there is a good deal of expense incurred in order to secure the business. I need not point out to Deputy Hewat, who is a business man, that expense of that kind will not be borne by the companies but by the local authorities, and that it is added to the premiums. I am inclined to think that Deputy Hewat will find himself almost alone in his opposition to the Bill, and while at the present moment I cannot foresee how it is going to work out, it seems to me to be a simple business proposition. In my opinion re-insurance should not be necessary, because, from my understanding of it, the necessity for re-insurance would be in cases where a company would find itself involved in risks where, owing to some possible catastrophes, it might be called on to pay more than its resources would allow. The property of local authorities is not likely to be attacked at any time by a catastrophe. It is not likely that there will be fires in the premises of local authorities all over the country at the one time. This class of business is not to be compared with the case of an insurance company which might have insured a number of ships which would be involved in a storm in the Atlantic Ocean when two or three might be wrecked. That would place a responsibility beyond its resources on a company. I have every confidence that this project will be a success and that it will result in a considerable saving to the ratepayers. I believe that business interests are not so sacrosanct as to deserve special consideration in a matter of this kind.

Professor MAGENNIS

There are two outstanding sections in this Bill. Section 4 states:

Such of the provisions of the Assurance Companies Act, 1909, as relate to deposits under that Act shall not apply with respect to fire insurance business or employers' liability business carried on by a company which satisfies the Minister for Industry and Commerce that it has complied with all the conditions prescribed by Section 2 of this Act.

In conjunction with that, Section 2 becomes of importance. I have brought here, if you will permit me to read them, the sections that are referred to in the Insurance Companies Act of 1909. In that Act it is provided that if any company or body of persons does insurance of certain classes they must make a deposit—£20,000 for life insurance, and when fire and accident insurance is carried on, but not insurance against employers' liability. If such a company does not do life business and wants to do fire business, it must forthwith deposit £20,000, and if, further, it is to engage in insurance against liabilities under the Employers Liability Act it must deposit a further £20,000. Here are the exception clauses. Section 31 provides:

"Such of the provisions of this Act as relate to deposits to be made under this Act shall not apply where the company is an association of owners or occupiers of buildings or other property which satisfies the Board of Trade that it is carrying on, or is about to carry on, business wholly or mainly for the purpose of the mutual insurance of its members against damage by or incidental to fire caused to the house or other property owned or occupied by them."

There is a similar provision in Section 33 as regards employers' liability. Sub-section (a) provides:

"This Act shall not apply where the company is an association of employers which satisfies the Board of Trade that it is carrying on, or is about to carry on, business wholly or mainly for the purpose of the mutual insurance of its members against liability to pay compensation or damages to workmen employed by them either alone or in conjunction with insurance against any other risk incident to their trade or industry." Section 2 of this Bill states:

"This Act applies to every company registered in Saorstát Eireann," &c., "which complies with the following conditions, that is to say:—

(a) the objects of the company must be wholly or mainly one or both of the following, that is to say:—

(i) the mutual insurance of its members against damage by or incidental to fire caused to the houses or other property owned or occupied by them, and

(ii) the mutual insurance of its members against liability to pay compensation or damages to workmen employed by them, and

(b) the liability of its members must be limited by guarantee and the amount to be guaranteed by any one member must not exceed ten pounds, and

(c) the company must not have a share capital, and

(d) all the members of the company must be local authorities.

These two provisions, taken together, are practically an insistence on the type of insurance to be provided by this combination of local authorities—this mutual insurance. It is mutual insurance with a guarantee but without share capital and "whatever expenses are incurred"—and of course expenses will be incurred—"by a local authority under the Act are to be defrayed and paid as part of the general expenses of such local authority in the performance of its duties." So that by this clause all the expenses to incurred, the payment of officials and, in case of re-insurance, the payment of premiums, would also come out of the rates raised by the local authority. While the Bill is so careful to insist upon mutual insurance, it conveys the impression that, because it speaks of a guarantee, and that each local authority is limited to a guarantee of £10, the total risk incurred by any given local authority is limited to £10. So that on the face of it, to a superficial observer—to Deputy Wilson and to Deputy Heffernan—it appears a highly attractive proposition because, in lieu of the previous method of paying annual premiums to an insurance company, they are, as these Deputies stated, to pocket the premiums and lead a serene life with the quiet assurance that all is well; if the worst should happen the local authority is limited only to its guarantee of £10, and that is a mere trifle in the finances of a local authority; so again all is well.

I direct the attention of Deputy Heffernan to a very important judgment of the British courts on this matter. Deputy Heffernan told us that he has not considered the proposals to see how they would work, that he has not gone into the matter at all analytically but, in an airy fashion at the end of his speech, he assured us that he was quite confident the Bill will work out well. He gives this proposal a general benediction while he confesses that he does not understand the measure or how it will operate. The question I put is: Will this be mutual insurance? What is mutual insurance, and what does it involve? Here is a leading case of the Lion Insurance Association v. Tucker, Law Reports, 1883, Queen's Bench Division volume 12, page 176. That was a Mutual Marine Insurance Company, and its Articles of Association were not very unlike the terms of this Bill. There was provision for mutual insurance of shipowners, and there was a guarantee. They were mutual assurers liable amongst themselves for a guarantee to the amount of £5. That was to cover costs and expenses. The company was wound up and one of the members claimed that though ships were insured at the time when the company was wound up his total liability was limited to £5. I would ask the attention of Deputy Wilson and others interested in the well-being of local authorities to the judgment in this case. This Mutual Insurance Company with regard to ships is on all fours with the mutual assurance of property against fire or of each local authority against its liability as an employer. The court defined the position of a member of a mutual assurance society such as this on page 188 as follows:—

"There is no doubt that he (Tucker, the defendant) is a member of the association, but he is something more: he is a person insured by some of the members of the association, and he is an insurer of some of the members of that association. Therefore he is not only a member, but also an insurer and an assured: he is all three."

Not only under this Bill is it contemplated that the local authority would be a member, but it would be insured and an assurer. What follows?

"A member of such an association," the judgment continues, "is liable to the full extent of his property for contribution towards the losses which other members may incur by reason of loss of ships insured in the said mutual association, and that liability has no reference to his guarantee at all."

That is the law. Once a local authority under this Bill becomes a member of a mutual insurance society it is more than a mere member, more than an authority insured: it is an insurer and co-insurer, liable to the total extent and to the last shilling and the last article it possesses for losses of the other insured. This is the proposal that meets with the optimistic assent and the hearty approval of Deputy Heffernan.

Mr. WILSON

May I point out that there is no compulsion on any local authority to be a mutual insurer or to be insured by others.

Professor MAGENNIS

Very good. Then the mutual assurance society, according to that, will only be a society of such local authorities as combine. That lessens whatever value there was in the way of massed assets to provide security. Deputy Wilson is now giving a formidable argument against the value of the proposal. It is strange that he omitted that from his speech. It may be said that this terrible weight of liability may be removed from the shoulders of a local authority or authorities through the simple process of reinsurance. What does that amount to? That these county councils and other local authorities are to combine in order to become agents for foreign insurance companies, to take out policies under this and pay premiums upon them with the ratepayer's money. Under this Bill insurance and reinsurance by way of paying premiums on policies is quite open. There is no law prohibiting it, but there is every inducement for the local authority to act as any private citizen would act when he insures his property against fire and himself against employers' liability. He takes out a policy for the proper amount, pays his premium and is protected. That is the position of any local authority. Now, when this association is formed and it seeks to save itself by reinsurance, what is it doing but, by way of reinsurance, repeating the original position— that is provided it can get other companies to reinsure with. Anyone who knows how insurance companies deal knows that no tariff company would reinsure them at all except upon such terms as would make their reinsurance exceedingly costly. The result is that they will have to go abroad, they will have to go to the Continent of Europe, and you will have more exportation of Irish capital and more sending away of Irish money to prevent Irish insurance companies from operating.

Suppose they do not re-insure, what then? Some disastrous fire breaks out in one of the buildings of these local authorities. All the others, thanks to being insurers, must pay up. That comes out of the ratepayers' money. Will Deputy Heffernan or Deputy Wilson guarantee the country against the outbreak of fire? No one could do so. What happened in Chicago might happen in any of the towns. In one night the whole place might be burned out. Deputy Wilson thinks it is a splendid thing to contemplate that possibility and to incur the ensuing liability. The fact is, there never was any demand for this. To my mind, it is the worst measure that the Government has introduced, and it is difficult to believe that they are serious in desiring to push it through. There is not a single solid argument in the name of business that could be urged in favour of it. At one moment we have measures curtailing the powers of local authorities and the next moment we are asked to support a Bill which will give them new power to incur liabilities from which they ought to be exempted if there was any contrivance for securing that exemption. The fact is that the Government have no settled policy whatsoever with regard to local authorities. They have been speaking with two voices. At one time they are democrats and at another time, in an autocratic spirit, they would suppress local responsibilities. Now they want to create local responsibility of a financial character and of a terrible nature in point of extent.

Mr. JOHNSON

I come under the castigation that Deputy Magennis has aimed at Deputy Heffernan. I have not given any particular study to this Bill or to its implications, but I have listened to Deputy Magennis and have learned the reasons why he thinks the Dáil should oppose this Bill. I have listened carefully to his leading case and to the arguments that he has adduced, but I have not heard any arguments in favour of the Bill except those put up by Deputy Heffernan. I regret I did not follow the arguments that the Minister put forward when introducing the Bill. Deputy Magennis's argument against the Bill has gone a long way to convince me of its desirability. I learned that under the law there are responsibilities upon the local bodies who would become members of mutual assurance societies which are practically unlimited: that is to say, the liability is not at all affected by the amount of this guarantee, but being a member of a mutual association each member is responsible to the extent of its full property holding to fulfil its promises—promises to insure its fellow-members. The Deputy also gave us some outline of what was meant by insurance, but he distinguished between a mutual assurance society and the tariff companies. Apparently he is in favour of making this business of insurance purely a financial matter, or rather a private financial matter conducted for the profit of the shareholders of the company. The idea of mutual help appears to be anathema when it comes to fire or to workmen's compensation insurance: that this is a function that ought to be and must be conducted for private profit and should not be a mutual obligation—one person or one local authority with another. I dissent absolutely from that proposition. Of all the public functions that could be named, outside of public health and the preservation of public health, I think insurance is one that ought to fall upon society, upon the social organisation, whether that is a voluntary association or an inevitable national or municipal association, and to the extent that we proceed towards making this liability for mutual help general, without the intervention of private profit-seekers, I am in favour of that process. The objections that are given by Deputy Magennis are that inasmuch as it might be difficult to find tariff companies to enter into ordinary business relations with the mutual society composed of local authorities, they would charge too high a rate for the risk they were prepared to run, it would oblige the mutual society to seek its covering insurance abroad and there would be a consequent exportation of Irish capital.

What is the alternative? Are the Irish companies able to bear all the risks that they are running, or do they not export capital? Is it not inevitable that they shall export capital exactly in the same way that the proposed company would do? Or is it contended that the companies which we have are able to bear all the liabilities without any reinsurance. It is certainly not a fact. They cannot find companies in Ireland sufficient to enable that burden to be borne by Irish companies, and they must export the capital. I am not sure whether it was intended, but I thought there was a reference to the deposit that the ordinary companies were obliged to make, and there was an echo of the notion which many people have, people who are not very observant or analytical, that that deposit is really an assurance to the policy-holders, and that it is of importance they should take it into account. Well, I think the sooner that notion is dispelled the better. The value of a deposit of £20,000 is very small indeed. I am afraid when you come to consider the security of the policy-holders it is undoubtedly a fact that insurance companies of all kinds must spend, and I say waste, a great amount of their revenue in seeking business, and that that money which is wasted, or, if it pleases the Deputies better, which is spent in seeking business, must come from the premiums the policy-holders pay. Surely it is reasonable to say that if an association of public bodies, such as municipal corporations, can come together and say: "We are going to bear our own insurance," it is just as valid and economical as for a big steamship company to bear its own insurance, or a big railway company, or the State? Big steamship companies, big corporations, that have a great variety of risks, and a great amount of property in their charge, bear their own insurance, and they do it for economy. They re-insure special risks, but they do it for economy sake.

If that is allowable in the case of big private corporations why is it objectionable when we come to public bodies? Of course I think the real objection to this Bill is that it is decreasing the amount of cash that is available for the business of insurance companies conducted for private profit. But when, as a community, we have allowed this business, a very important social function, to be carried on by individuals and groups of individuals for their profit, I think that we ought to encourage public bodies at least to relieve themselves of the charge, which excessive advertising and excessive commissions, and excessive administration expenses in any direction impose upon the policy-holders and premium-payers. I know nothing about the practice, but I am prepared to say that it would be possible to find companies either in or outside the country quite prepared to relieve this proposed association of some of its risks at reasonable premiums until it is able to bear its own liabilities. The suggestion of a threat that tariff companies will boycott such an organisation as this can be met, I think, by a grouping together of similar organisations. I think it is a movement that is distinctly in the right direction, but I shall not be satisfied in regard to this whole question of insurance, certainly for public bodies, and also I hope for private citizens, until the time comes, I hope not far hence, when fire and workmen's compensation insurance and life insurance will be undertaken by a national organisation not run for private profit. I think that it is the kind of a risk—I am not speaking now of speculative or betting risks but the ordinary risks of community life—which should be borne by a national organisation as serving a social purpose and not for profit-seeking, and because this Bill seems to move distinctly in that direction I shall give it my support.

Professor MAGENNIS

May I say by way of explanation, that Deputy Johnson gathered from my criticism that mutual help and co-operation are anathema to me. The reverse is the case. I am quite as strong, but not as worthy or admirable a champion of these excellent things as Deputy Johnson. There is nothing to prevent an association of local authorities from depositing £20,000 and doing business themselves. My argument was against their exemption from the necessity of lodging £20,000, because there is no actuarial calculation given on the side of the Government to show that the ratepayers would save, or that the advantages they would get would be provided for them on better terms and more security. I argued not against permitting local authorities joining together and carrying their own insurance, but against allowing them to do it without lodging money, and without their being in the position to save the ratepayers from an illimitable burden.

Mr. RODDY

I understand that the proposal embodied in this Bill has been initiated by the General Council of County Councils. It is surely time that our public bodies interested themselves in a constructive proposal, such as this, as its operations cannot be but of great economic benefit to the country and, incidentally, a source of substantial relief to the ratepayers. The General Council of County Councils has been considering a scheme of this kind since 1907, and I understand that the members of that body are now unanimously in favour of this Bill, in the light of the experience which they gained in the intervening years. The Bill, as I understand it, provides for the absolute control of insurance by public bodies in the Saorstát, so that, even when the company reaches an assured position of prosperity in the insurance world, there will be no danger of this control being alienated. Hitherto the public bodies have done more than any other class to build up the prosperity of insurance companies, with the result that, when our Irish companies reached the pinnacle of success English corporation stepped in and gobbled them up. I happened to be a member of the General Council of County Councils in 1923 when a return was asked for by the secretary of that body from the various councils in the Saorstát. Out of 326 councils, returns were received from 199. According to these returns it appeared that during a period of eleven years 199 local authorities expended a sum of £79,848 in premiums and recovered £5,796 in losses. In other words, as the Minister pointed out, the ratio of fire losses to premiums paid-up was only 7.3 per cent. That shows clearly the enormous profits which the companies make out of the insurance obtained from local bodies, and it also shows the large saving that could be effected if an insurance association, such as that proposed in the Bill, were functioning. It seems to me that the experiment in England, outlined in the circular letter which has been sent to Deputies by the Secretary of the General Council of County Councils, indicates the degree of success that would attend a similar experiment here.

Notwithstanding what Deputy Magennis has said, I fail to see why such a scheme in this country should not be a success, and I feel that public bodies are now in the humour to make it a success. Like Deputy Johnson, I am not well versed in the intricacies of insurance business, but I understand that the reserve funds of insurance companies are a mere fraction of the risks incurred, so that even the oldest of them must resort to re-insurance, which is, in my opinion, the only safeguard to public bodies in the system of insurance we have. I do not think that it can be argued that the Bill will interfere with existing Irish insurance companies. There is no doubt that a mutual insurance association, under the control of public bodies, will at all times be only too anxious to give preferential treatment as regards re-insurance to Irish companies of proved standing and stability. I have been associated with a proposal of this kind for a number of years as a member of the General Council of County Councils. I feel that it contains the elements of success, and for that reason I have great pleasure in supporting it.

Mr. BURKE

I do not think there is very much to say on the points raised. Deputy Hewat has rather taken exception to my bringing forward such a measure and maintained that it should be a Private Bill, but I think a measure that has the unanimous approval of the General Council of County Councils is pre-eminently the kind of measure that should be dealt with by the Minister for Local Government. For that reason I felt it incumbent upon me to introduce the Bill. As regards the merits of the Bill, I think that there can be no doubt that it will work out a highly beneficial measure. The company or companies formed as a result of the Bill will proceed exactly on the same lines as the English company, which was in all respects a conspicuous success. The risk ratio for the British local authorities in respect of fire insurance is only 16 per cent., and the risk ratio as regards other classes of property for fire insurance is something like 55 per cent. It is not a case of taking a plunge in the dark. The way has been already mapped out for us by the English company and we know exactly where we are going.

At the outset, of course, the company that will be formed as a result of this measure will be only able to retain a very small part of the business it will secure. It will have to re-insure practically up to 90 per cent. or more of its business, and in that way local authorities will run no undue risk. The funds that the company will have in hands will be able to meet any liability. It is the intention of the company also to re-insure as far as possible with Irish companies, but even at the present time the Irish companies only retain a very small portion of the business they secure from local authorities. They have to re-insure by far the greater portion of that. As reserve funds are accumulated, the company will be able to carry a larger share of the risk. Incidentally, I believe that it will probably tend towards giving more business to the Irish companies than they are able to get under present conditions. I am not insisting upon this as a Government measure, but I think that the general feeling of the House is very much in favour of the principle of the Bill and I commend it heartily to the Dáil.

Question—"That the Bill be read a Second Time"—put and agreed to.

AN CEANN COMHAIRLE

When will the Committee Stage be taken?

Mr. BURKE

I would suggest Wednesday next.

Professor MAGENNIS

There are a great many matters down for Wednesday, and if this Bill is taken on that day there will hardly be time for preparing amendments. Would the Minister be willing to say Thursday?

Mr. BURKE

I will agree to Thursday.

Committee Stage fixed for Thursday, 1st of July.

The Dáil adjourned at 7 p.m. to 3 p.m. on Thursday, 24th June.