Dáil Éireann debate -
Wednesday, 26 Oct 1938

Vol. 73 No. 1

Insurance (Amendment) Bill, 1938—Second Stage.

Minister for Industry and Commerce (Mr. Lemass)

I move, Sir, that the Insurance (Amendment) Bill, 1938, be read a Second Time.

The purpose, or the two main purposes, of this Bill are, I think, clearly stated in the Long Title; that is to say, it is

"An Act to confirm and give statutory effect to an Agreement made between certain assurance companies for the transfer of their life assurance business and their industrial assurance business to a single company, to make provision for divers matters arising out of or consequential on the said Agreement, including the making of similar agreements by other assurance companies, and to amend the law relating to assurance business."

Scheduled to the Bill, as Deputies will have noticed, is an agreement entered into between the City of Dublin Assurance Company, Limited; the Irish Life and General Assurance Company, Limited; the Irish National Assurance Company, Limited; and the Munster and Leinster Assurance Company, Limited. These four companies, referred to in the Bill as the participating companies, have undertaken to transfer their life assurance business and industrial assurance business to the Industrial and Life Assurance Amalgamation Company, Limited; that is to say, a new company, which is referred to throughout the Bill as the terminating company, incorporated for the purpose of consolidating the existing business.

As the title of the Bill indicates, its purposes are twofold: firstly, to confirm and to give statutory effect to the scheduled agreement and secondly, to enable other companies engaged in these two classes of business to enter into agreements with the new company for the transfer to it of their industrial and life assurance businesses on terms similar to the scheduled agreement.

We had a Bill dealing with assurance before the Dáil in 1936 and, as Deputies will remember, provisions were embodied in Part III of that Bill to encourage the amalgamation of the Irish life offices. In the course of prolonged discussions and negotiations following the enactment of the 1936 Act, it emerged that the British offices transacting life and industrial assurance business in this country were also prepared to accept the principle of amalgamation. The British offices did not consider that it was possible, however, to commit themselves to an amalgamation scheme until they were in a position to examine the terms and the conditions of any scheme adopted by the Irish offices, and to see how such of these offices as had deficiencies in their funds would have the deficiencies made good. The four participating offices have now executed an agreement and there is every prospect that the principal British offices transacting industrial assurance business here will transfer that business to the new Irish company.

The Bill provides, therefore, that, in addition to the four participating companies, any other company may join in the amalgamation by entering into an agreement with the new company, and adopting the provisions of the scheduled agreement so far as they may be applicable. Negotiations with the Prudential, the Brittanic, the Pearl, and the Refuge companies are proceeding and there is every reason to believe that they will result in agreements between the individual British offices and the terminating company. In all important respects, such as the basis of valuation, the allotment of shares and the provisions for the transfer of staff, the terms of these agreements will be the same as those set out in the scheduled agreement and, further the bonuses which the policies of these companies have enjoyed in the past will be guaranteed in the future. Adequate provision will be made by the British companies for these bonuses. There will, of course, be no question of the State covering deficiencies in the case of these companies and assets equivalent to the full liability will be transferred in each case. The agreements with the British companies will probably require certain legal formalities in the British courts and the passing of this Bill by the Dáil will be important in that connection. The date for the transfer of the business will be so fixed as to enable these formalities to be completed and, in the event of any unforeseen conditions arising, the position can be reconsidered.

The amalgamation scheme which it is proposed by this Bill to facilitate and to make as comprehensive as possible, embodies three main principles: first, that the interest of the policyholders, including those holding policies with companies whose assurance funds are not actuarily solvent, shall be fully safeguarded; second, that all companies joining in the amalgamation of business shall enter on a common basis; and, third, that the employees affected shall be fairly dealt with. An important feature of the scheme of amalgamation is that the liabilities and assets of the companies are to be ascertained on a uniform basis, and that in the case of such of the Irish offices as are unable to transfer assets equal to the ascertained liability, the deficiency is to be made good out of money provided by the State.

It is recognised that the Irish offices have had to compete with the external offices on unequal terms for a share in the business. The inequality of the competition arises from various causes, the most obvious one being the disparity between the limited funds of the native offices and the very large accumulated funds of the external offices. The native concerns entered the field to compete with external offices which had already built up the necessary organisations and firmly established their business here. Apart from the disadvantages arising from limited financial resources, they had to contend with the difficulties attending all insurance institutions in their early stages. One heavy handicap was the high ratio of working expenses consequent on the comparatively small amount of business procurable by each company in the face of intense competition. That the Irish offices have succeeded in working up a substantial business, despite the disadvantages referred to, is evidenced by their combined premium income in the life and industrial branches of nearly £700,000, of which about £430,000 is accounted. for by the four offices which have executed the agreement which is the schedule to the Bill.

When the business of the participating companies has been valued on the basis provided for in the agreement, it will doubtless be found that in varying degrees the available assets will fall short of the ascertained liabilities. The State is concerned that the policyholders should not be adversely affected by any deficiency in the funds, and it is for this reason that it is prepared, as an essential condition of the amalgamation, to make good any deficiency out of State funds. That principle was recognised in the provisions embodied in Part III of the Act of 1936. As I have already indicated, the provisions of Part III of the 1936 Act are not wide enough to meet an amalgamation scheme of so comprehensive a character as has now become practicable, and it is now, therefore, proposed to repeal it.

Part III, I think, has served a useful purpose in that it has made possible the bringing together of the companies to discuss and hammer out a concrete and acceptable scheme of amalgamation. I may point out that the State's undertaking to make good any deficiency applies only in the case of the four companies which are parties to the scheduled agreement. Any other company joining in the amalgamation as an adopting company—to use the phrase in the Bill—must put up assets equal to its ascertained liabilities. As the State is to make good deficiencies in the assurance funds of the participating companies, it must see that all proper safeguards exist for the future organisation and conduct of the business. I am satisfied that the provisions embodied in the scheduled agreement and in the Bill contain all the necessary safeguards.

The new company has been set up for the purpose of taking over the business of the four participating companies and of such other companies as enter into agreements for the transfer of their business. Its authorised share capital is £200,010, divided into 2,000,000 A ordinary shares of 2/- each and 100 B ordinary shares of 2/- each. No cash consideration will be paid to the amalgamating companies for the transfer of their business. Instead, each company will be allotted a number of fully paid-up A shares determined by the measure of the particular company's premium income and the degree of the solvency of its funds. If it is able to transfer assets equal to its liabilities, then it will be allotted a 2/- A share for each £1 of premium income, the premium income or goodwill being calculated in the manner laid down in the scheduled agreement.

Where the Minister for Finance is called upon to make good a deficiency in the assets of any company, the number of shares allotted to that company will be reduced to correspond to its degree of solvency and the balance will be allotted to the Minister for Finance. In addition, that Minister is to be allotted whichever is the lesser of 100,000 shares or 5 per cent. of the issued capital. The Minister for Finance will hold all of the 100 B shares. These shares carry the sole voting rights, thus giving him complete control of the company. The company, having taken over the existing business, will confine its operations to working off that business as a closed fund, after which the company will be liquidated.

Deputies may wish to know why the capital is divided into 2/- shares rather than £1 shares. The reason is this. The issued share capital of the company must be represented on the assets side of its balance sheet by a corresponding figure for goodwill since no cash consideration will pass for the shares. The low nominal value of the shares, 2/-, was fixed so as to keep the goodwill figure at a low level in order that this intangible asset might be eliminated from the balance sheet at an early stage in the company's career. It will be appreciated that the amount of the company's capital does not purport to represent the value of the businesses to be transferred. The shares are merely tokens by which the equity in the amalgamated company can be distributed among the participants.

In addition to the terminating company, a further public limited liability company, referred to in the Bill as the permanent company, is to be incorporated for the purpose of taking a transfer of the staffs and goodwill of further business of the amalgamating companies, of servicing the business transferred to the terminating company and transacting new business. That company will be the operating company. Its authorised share capital will be £200,000, divided into 200,000 ordinary shares of £1 each. All the original share capital of the permanent company is to be taken up by the terminating company which will continue, until its liquidation to hold not less than 76 per cent. of the issued shares of the permanent company. The Minister for Finance will thus have a dual control: directly over the terminating company with his exclusive holding of the voting shares and indirectly over the permanent company through its control of the terminating company.

The memorandum and articles of association of both are to be subject to the approval of the Minister for Industry and Commerce. The directors of the terminating company, including the first and any subsequent directors, are appointable by the Minister for Industry and Commerce and the first directors of the permanent company are similarly appointable. There is an advantage in setting up two companies to handle the amalgamation. The existing policy-holders in the several companies will have their contracts transferred to the terminating company which will, from the outset, have assets adequate to meet the claims of these policy-holders as they arise. All new policies will be issued by the operating company which, having taken over the staffs and connections of the existing offices, will be in a position to conduct future business with all the advantages of a unified organisation.

During the passage of the Insurance Act of 1936 through the House, concern was expressed by many Deputies as to the future of employees who might be affected by the amalgamation scheme. I made it quite clear then that I would not be prepared to approve of any scheme of amalgamation which did not recognise the right of employees, who depend for their livelihood on the insurance industry, to continue in that industry. The scheme now before the House gives effect to that principle. Under the scheme, the right to employment by the operating company is secured to the staffs of the participating companies, with certain minor exceptions, at rates of remuneration equal to their average earnings during the two years ended June of this year. The minor exceptions are persons who entered the service after June of 1936, or were earning less than 20/- per week, or are over 60 years of age. These persons may be offered employment, but will not have an express right to employment, but if they are not offered employment in the operating company, they will be entitled to compensation on the scale laid down in the agreement.

Provision is made to prevent dismissals on account of redundancy and a board of referees is to be made up to which an appeal will be made if any dismissed member of the staff considers that his dismissal is due to redundancy. Directors and executives are in a different category. None of these will have an expressed right to be taken over. If, however, they are not taken over by the terminating company or the permanent company, they will be entitled to compensation on the terms provided in the agreement. It is certain, I think, that the operating company, binding itself to take over the general body of existing staffs to work in a unified block of business, will, for some years at least, have to carry more employees than would in ordinary circumstances be necessary. In fairness to the staffs, however, that cannot be avoided and the position will no doubt adjust itself through normal wastage over a period of years.

The agreement contains adequate safeguards against the discharge of persons on grounds of redundancy. It is not contemplated that it will be necessary, in practice, to invoke these safeguards, but it is nevertheless well to have them there. I believe the proposals embodied in the Bill will mark a turning point in the history of Irish life assurance. Having regard to the conditions under which the business has heretofore had to be conducted, it cannot be doubted that this amalgamation scheme will result in the advancement of life assurance, and particularly industrial life assurance, in this country. The operating company will have all the advantages of a unified organisation and persons desiring to place new business will have at their disposal a national insurance institution in which they can have the fullest confidence.

I should like to take this opportunity of expressing my appreciation of the manner in which the officers concerned have co-operated in the formulation and development of the scheme now before the House. The settling of an amalgamation scheme of any kind is not an easy matter, and the formulation of a scheme of amalgamation of life assurance business, involving the solution of many technical problems peculiar to the nature of that business, is a matter of great complexity, and I am the more appreciative, therefore, of the efforts which have gone to produce the scheme. I am confident in believing that, with a spirit of co-operation on the part of all concerned, the future holds bright prospects for Irish life and industrial assurance. It is very desirable that the proposals in the Bill should receive legislative sanction as speedily as possible so that the amalgamation may be proceeded with without delay, and as the main purpose of the Bill is to confirm the scheduled agreement, I trust the House will see its way to approve of the Bill as an agreed measure.

General Mulcahy

Normally, one would like to discuss on this measure a few things, such as why no names from amongst the names of the large group of persons, who, as directors, managers or officials in one way or another, were associated with the development of the insurance business in Ireland in the past appear among the names of the directors of the new company. One might like also to discuss the particular significance of the names that do appear on the board of the new company, and why it was not possible to get an amalgamation which brought in all the Irish companies. Normally, as I say, one would wish to discuss some of these things, and it would be important to do so, but the Minister comes before us with this Bill which, on the face of it, gives no indication that the large exodus of money from this country to Great Britain, about which the Minister complained so much in the past, is going to be stopped. After negotiations which must have been delicate and difficult, bringing four of the Irish companies together, the Minister tells us that as soon as this thing is settled, certain British companies carrying on industrial assurance in the country are going to join. In these circumstances, the Minister, in introducing this Bill, puts the House in the position of discussing a very difficult and a very delicate transaction in the middle of its being completed, because, as I say, the Bill, in itself, gives no indication that the exodus of Irish money to British companies is going to be stopped. If the British companies he mentions are going to transfer their Irish industrial insurance to this new company, some little in that direction will be achieved, but, generally, my position with regard to this Bill is that in the circumstances in which the Minister presents it to the House and in view of the statement he has made to the House, it is impossible to discuss it. I want, therefore, to take him on one point alone. The Minister gives the House the assurance that this is a sound development, that there need be no fear for the future of a company of this particular kind, that it will be the nucleus around which the conservation of Irish insurance companies is going to grow, that the insurance policy-holders in the past are fully secured, and that the arrangement is such that new policy-holders that will do business with the new permanent company that is set up will have full assurance themselves, and that, as well as that, the directors and the employees of the companies now being amalgamated will all be reasonably and equitably looked after. In presenting that picture to the House here some of us are inevitably driven back to consider the people who were employees of these companies and who, because of the operation of the 1936 Act, have had their services dispensed with and have got compensation of no kind at all.

Now, take one of the companies here. I know of one particular company which, on its life side, had 40 indoor workers and between 200 and 300 outdoor workers, and on the fire and accident side of the business had 11 workers, three of whom were outside inspectors. There you have something like, in all, say, 300 persons on one side and 11 persons on the other side. Under the 1936 Act they had to give up their fire and accident business. Eight of the people who were actually employed under the fire and accident business were retained and have been on life business since and are given the guarantees for future employment or for compensation that the Minister speaks about, but three have had their services dispensed with, and in one particular case an official, after nine and a quarter years' service with his company, got this: "I enclose a cheque for four weeks' salary in lieu of notice." Now, I do submit to the Minister that to leave a small group such as that where, say, 311 or 320 persons of one particular company are being given the security about which the Minister speaks under this, and to throw out on the road three persons because of the operation of the Insurance Act, of which this is the fruit, is certainly a thing that is inequitable and unreasonable. It is not possible to introduce into the agreement, which is the appendix to this particular Bill, anything that will cover such cases, but I submit that it is due to these people and that it is possible for the Minister, now that he sees success in sight, to put into the present Bill a stipulation that, where persons who were the employees of these companies on the fire and accident side have been dislodged from their employment without compensation as a result either of the passing or the coming into force of the 1936 Act, they should be given from the new company the same terms of compensation, or the same treatment, as are being given to those persons who were fortunate enough to have been retained. If the relation in numbers between the numbers who were employees of these companies and are being retained or compensated under this system to the numbers that are actually being let go is taken into consideration, then the problem is infinitesimal, but if it is not recognised that these people are entitled to compensation for being dislodged as a result of the Minister's 1936 Act, then the injustice that is done to these people is a very great injustice indeed.

That is a matter that I would ask the Minister to consider fully and carefully, and, as I say, with regard to any other aspect of the Bill, as far as I am concerned, and as the Minister has told the House that he is in the middle of a very difficult and delicate operation, I think it is quite impossible for me, at any rate, to discuss the proposals of the measure in this House. I do say, however, that left as they are, they do nothing to stop the stream of monies leaving this country for Great Britain or other countries for insurance purposes.

Mr. Norton

There are one or two matters that I should like to raise on this Bill. The Minister has told us of the functions of the terminating company and has informed us that its business will be to take over the assets and liabilities of the four amalgamated companies and also to promote the establishment of a permanent company. He did not indicate, however how long the terminating company is going to function and how soon it will be before the permanent company comes into operation to transact business as the normal company looking after the interests of the participating companies in the amalgamation scheme, and of any companies which may subsequently agree to adhere to the amalgamation scheme now being provided for. I should like, therefore, to know how long this temporary company will function, welding these parts together; how soon we may expect the permanent company to come into operation, and also whether the intention of the State in taking up capital in the terminating company and exercising absolute control thereby of the manipulation of shares, and also exercising control in respect of the permanent company is intended to be an intimation that the State will continue to direct the policy of this permanent company; or is it intended, at a later date, that the State will get out, will sell out its rights in the matter and allow this company to be operated as present-day insurance companies are operated in this country? Does the Minister visualise the State continuing to have a directing influence in the policy of this new company? Does he intend that the State should have permanent control over the company, and does he intend that the State is going to take a guiding hand in shaping the destinies of this new company which is now going to make a serious effort to compete for life and industrial business in this country?

These are questions on which I should like the Minister to give us some information because they represent important considerations in approaching this Bill. There are other aspects of the Bill, however, upon which I should like to express a view. One cannot but feel convinced that, if the directors of these companies spent a good deal of time looking after this amalgamation scheme, they certainly spent a very substantial amount of that time looking after themselves. I have taken the trouble to try to find out the number of directors affected by these four companies, and there appears to be 27 directors, in all, affected by the four companies, the City of Dublin, the Munster and Leinster, the Irish National, and the Irish Life. We are told in the agreement that the City of Dublin directors are to get £10,000 compensation. The Munster and Leinster, with six directors, are going to get £9,000 between them, and in the case of the other companies they are going to get three, four or five times their annual fees, according to their period of service as directors, and on top of that, if they were chairmen of these companies, they will get twice their annual fees in addition. I think the Irish National Insurance Company has six directors and that the Irish Life —or rather, I think, the City of Dublin —has six directors and that the other company has seven directors. It looks to me as if about 13 directors alone are likely to absorb close on £20,000 compensation. When we have paid that £20,000 to about 13 directors, we find there are still 15 more to be provided for. By the time the entire 27 directors are provided for it looks to me as if a sum in the vicinity of £40,000 will have been spent. One might even understand that, if this were a giant capitalised undertaking, but the paid-up capital of the four companies concerned amounts to only £92,000. We are going to pay out approximately half the paid-up capital of the four companies in compensation to about 27 directors. That seems to me to be particularly generous treatment of the directors. It is exceptionally generous treatment when you remember that this amalgamation is necessary because of the fact that those companies are actuarially insolvent according to the Minister; this is necessary in order to save the policy-holders and to save Irish insurance from the serious damage which would ensue to it if there were default by any one of those companies. But the scheme does not end when you have paid compensation to the 27 directors; it does not end when you have written cheques for approximately £40,000. There is another group to be dealt with, and those are executives, managing directors——

Mr. Kennedy

They are included in the specified sum for the two companies.

Mr. Norton

Does the Minister say that?

Mr. Lemass

Yes.

Mr. Norton

I am quite sure there is something wrong in that, because one gentleman in the insurance world is boasting that he alone will get about £10,000 out of this scheme, five times his annual emoluments.

Mr. Lemass

Deputy Kennedy referred only to the two companies in respect of which there is a limit applied.

Mr. Norton

Now I understand, but you have to look at the executives, the managing directors, the assistant managing directors, the agency managers, and people of that kind. They are also entitled to come into this scheme of compensation. The compensation they get is five times their annual emoluments. You, therefore, get this position, that apart from the executive who would be compensated you are compensating the directors. Here there seems to be a peculiar and in my view an unjustifiable distinction in the principle of compensation as applied to the agents, for instance, and as applied to the directors. A director who has ten years' service as a director will get five times his annual income, which is equivalent to five years' salary, but an agent who has ten years' service with the same company will get only ten months' salary. Directorships are in themselves prima facie evidence of relative freedom from poverty, but a director is going to get five years' salary while for the same service an agent is going to get only ten months' salary. That seems to me to be an unjustifiable differentiation in the matter of calculating compensation. I cannot understand why a director should be allowed to get away with five years' salary for ten years' service, while an agent with ten years' service will have to content himself with ten months' salary if he is not taken over by the new company. Of course we all know perfectly well that the new company is not going to be able to sustain and keep in employment those who are at present employed as agents in the four separate companies. An effort may be made at this stage to say, “Well, while there may be some disemployment, there will not be much,” but I think we will not have to wait very long before we get sufficient experience of the new company to realise that this kind of tightening up of the insurance business—the amalgamation of four companies, and the abolition of four separate offices in one town or city—is going to mean a considerable amount of disemployment. If those people are to be disemployed they ought to get decent compensation, but to pay a man with ten years' service merely ten months' salary—and the bulk of them, mind you, will not get more than that—does not seem to me to be treating those agents fairly.

In his approach to the whole matter, the Minister has apparently given his consent to an arrangement by which very substantial compensation is being afforded to directors and executives on the one hand, while inadequate compensation is being given to agents on the other hand. We had an assurance from the Minister on the previous Bill that he would not give his imprimatur to a scheme which did not provide reasonable compensation for the agents, but it cannot be contended that giving a man four weeks' pay for a year's service is adequate compensation, particularly for a man who has followed the insurance business, and who under this scheme of insurance administration is going to find it harder than ever to get back into the insurance business with the throwback from this new company. We ought to have from the Minister some information as to why this discrepancy in the basis of compensation was consented to by him. I should like to know, Sir, from you whether it is permissible for a member of the House to submit amendments to this Bill in such a manner as to alter the schedule to this agreement. We are being asked in this Bill to vote State money, and we ought to be able to amend this schedule in such a way as to ensure that that State money will not be utilised on the one hand for paying excessively generous compensation, while on the other hand it is withheld from paying reasonable compensation to persons less favourably placed. I should like to know, therefore, whether you, Sir, would rule that amendments to alter this schedule can be moved by individual Deputies, or whether, if that is not practicable, it will be necessary to endeavour to defeat the section which gives legislative sanction to the schedule.

Mr. Cosgrave

There is a difficulty in discussing this measure which will be present, I am sure, to every Deputy's mind when he examines it, because we really have no alternative to accepting this agreement. It is an agreement which has been entered into by four companies, presumably with the consent of the Minister. There could scarcely be a more unsatisfactory method of doing business, because, while we are committed to acceptance of this agreement, even the Minister, I am quite sure, has not the faintest knowledge of what sum of money the State is being committed to in this transaction. If we take even the case which has been mentioned by Deputy Norton, and I presume that he spoke without any inner knowledge, it is possible that the same scale of remuneration for their directors did not operate in the case of each one of those companies. If Deputies will take the trouble to look up the capital subscribed in each case, they will find that there is a very considerable difference. The total capital invested in those four companies is something under £90,000, I think. One of those companies has something like £45,000 paid up. It by no means follows that the company which has the most capital paid up has been the most successful or the best managed. While the Minister devoted some of his remarks to the insurance industry as such, the House is not in possession of any information of any kind to show in what respect this country has benefited in any way by reason of the flotation and the business of the Irish insurance companies. It may, but we have never heard of it. In the normal working of insurance business, the major sums of money expended are in respect of agents or collectors, or other people of that sort. You go from them into the offices, and in what are described as the foreign insurance offices, I suppose a percentage of those employed are Irish. I do not suppose there is a foreign collector employed by any of these outside companies.

I have not yet been told by the Minister, nor have I learned from any other source, what precise national advantage the country derived by reason of the inauguration of these national insurance companies or Irish insurance companies. I infer from what the Minister stated that money has been lost in this insurance business and that, so far as the Dáil and the State are concerned, they have accepted one principle, that the policy-holders will not be at any loss; that the State is prepared to put up whatever money is necessary to safeguard the policy-holders. What it will cost nobody knows. We have no idea of what it will cost us, but that it will cost us something we may all assume. We would not have the elaborate machinery of the Minister for Finance taking up shares in the company if it were not in contemplation that we were going to be in for some of the cost. On that examination, although some one or two or three of these companies may have been a success, taking them all round they have been a failure from the point of view of a balance sheet. That is all that can be said in respect of Irish experience in the last ten or 15 years in connection with insurance business.

We are prepared to pay for that in so far as the policy-holders are concerned, but I think that the Dáil is entitled to know what compensation is being paid in actual cash to these directors. Whether it is their fault or their misfortune, they are, in bulk, the people who have lost our money or lost the money of the policy-holders so that they are not in a position to make good what their tables or advertisements or attractions offered to the public. It may be that we are doing good business in getting rid of them. It may be that they deserve all that is going to be given to them. But, so far as the House is concerned, it has to place the responsibility for that decision upon the Minister. The Minister has made up his mind that that is the proper thing to do. But I think he should further and take the House into his confidence and let us know what the remuneration has been in respect of each director of these companies. In the case of those which are solvent, they well deserve it. It is an injustice and a misfortune that a company which is solvent and in a good position in doing its business and which had made good is, by reason of the weakness of other companies, now forced to come in and that the directors who have done so well have to go out of their employment.

In so far as the general employment of the staff without particularisation is concerned, I say that if there is something like £430,000 of premium income to be collected, presumably much the same number of persons will be required to collect that in future.

On the other question raised by the Minister, I can express no opinion; that is, the desirability of getting non-Irish companies to join. What I am concerned about very much is what the directorate of the new company is going to be. I would be particularly nervous in respect of that directorate if it were to follow the line of the nominations which have been made by the Government in respect of other activities of a somewhat similar kind. Some 20 years or more ago when a proposal was made at the Sinn Féin Ard Fheis that insurance should be started by Sinn Féin I opposed it. I said I did not know anybody in this country who possessed the requisite knowledge and experience of this business to justify the public in putting their money at its disposal. We had various phases of it. There was, first of all, the collection. That appeared to be easy, as people were accustomed to it, and a number of collectors had experience in other companies. Then there was the central management. That was not so easy, because there were not people with so much experience of it. Then there was the investment of the funds. I do not know in connection with the insurance experience of those four companies or of the other companies which have not come in in what respect the real weakness has been discovered. The Minister told us that the cost of collection, or whatever other term is applied to the expenses inseparable from the collection of premiums, was particularly high in this country. I think he mentioned as a reason for that the smallness of our population. I wonder if that has been the experience of the companies that are not of Irish origin.

Mr. Lemass

The smallness of the volume of business done by the individual company.

Mr. Cosgrave

Is it that the company is overloaded with overhead expenses of one kind or another? Surely if there is only a small business done it could be arranged that the office work would not be so expensive as in the case of a large business? I think it has transpired from the Banking Commission report that while the general trend of commerce and manufacture has been towards large concerns, nevertheless there were small institutions capable of competing with the larger ones. In any case, for whatever reason, the expenses were higher. If that were due to defective management, if it were in any way the responsibility of the directorate, that was our misfortune and we have to pay for it now.

The principal concern of the Dáil is to see that the new directorate will be a qualified directorate, that there will not be merely political nominations. If my recollection is correct, there is certainly a very strong political tinge about the names mentioned in connection with the new directorate. I venture to say that outside one, or possibly two, they have very little experience of insurance. My information is to the effect that one of them is not too well and consequently will not be able to act. Will the Minister tell the House what is his view as to the real cause of the non-success of these companies? Was it their inherent smallness? Was it that the money which they had to invest was not well invested? Or was it by reason of the lack of expert knowledge on the part of the management that the costs were rather higher than they might otherwise be? Will he say, further, if he has any idea of what the compensating costs of this transaction are, as distinguished from the normal deficiency which has to be made up? It is a very nice question whether there should or should not be a segregation of these two items. If we regard it as our duty to wind up these companies, I should like to know whether the winding-up is not at the expense of the Irish investor. If my recollection is correct, those who subscribed to the Irish insurance companies during the last 18 or 20 years were people who could ill afford to lose their money. Will the State pay off these investors and seek shares subsequently in the new company? Let me give an example of what I mean. Let us take a company with a capital of, say, £20,000. Apart from the cost of the gratuity to the directors, that company is found, on examination of its position, to be worth £18,000. That is £2,000 short. I presume that if there were 20,000 shares of £1 each, shareholders would get nine shares for every ten they formerly held. But they happen to be responsible for paying off the directors. That means, say, an addition of £3,000. Does it follow from that that the shareholders are to be entitled to only £15,000 worth of shares in the new company and that, instead of getting nine out of ten shares, they will get only 15 out of 20? I do not consider that that would be fair.

I have no great gradh for this measure at all. Somehow, I think it is not reasonable to ask the Dáil to pass a Bill like this when they do not know what the amount of money involved is. We are committed to certain costs, but it is scarcely right, on our part, considering we have come in and regimented these people and told them that they have to join up, to put on them costs which may be unfair. They may have agreed to it but, if so, they have agreed in a very peculiar fashion. The negotiators, in the course of the proceedings, assumed they had a right to do this and, in the operative part of the Bill which the Minister has introduced, he assumes the same right. While I am not disposed to agree entirely with what Deputy Norton has said, there is a great deal in his contention that the best part of this agreement has been made by the directors themselves. There has been a statement that the employees would be fairly dealt with and it has been said that redundancy is not likely to arise. Suppose it does, what steps are to be taken to deal with it? I do not think that any course is open to us except to accept the Bill, but it is a very unsatisfactory proceeding from beginning to end. It was unreasonable to issue this Bill about a week ago, after the Dáil had been out of session for almost three months. The agreement was entered into on 13th September, and surely a fortnight was quite sufficient for the legislative part of the work. Why could we not have had the Bill a fortnight ago? It is a very complicated measure and one would require to be a lawyer as well as a business man to understand it in its entirety. I propose to support the Bill, but not with any enthusiasm. The House should get more information. The House should be told what the Bill is going to cost, and it should be told what compensation is to be paid to each of the individuals in questions.

Mr. Kennedy

I want to assure Deputy Cosgrave that no policy-holder in any of the participating companies has lost any money or is losing any money and that no advertisement has been issued respecting policies which has not been carried out. In 1936, an Insurance Bill was introduced and I make the statement without fear of contradiction, that no legislation in any country goes so far to protect policy-holders and the rights of the public in insurance as that Bill. The Irish insurance companies participating in this amalgamation could not carry on when the various parts of the 1936 Act would come into operation. But the Irish concerns were commercially sound propositions. They might not have been actuarially sound, but the history of British insurance shows that it took from 30 years to 50 years to make concerns there actuarially sound.

Mr. Davin

What is the difference between "commercially sound" and "actuarially sound"?

Mr. Kennedy

In the case of every policy taken out, there is a responsibility on the company to pay the required amount immediately in case of death. The computation of actuarial solvency is based on that. Commercial solvency is based on the day-to-day work. These companies were commercially sound and are commercially sound. Therefore, I say it is a libel on these companies to say that any policy-holder taking up a policy in any of these four companies paid 1/- for which he was not fully guaranteed. Then it is a question of what the State will lose. The State will not lose a threepenny bit because of the compensation paid and the policy-holder will not lose anything because of the bonus paid. That comes out of the assets of the participating companies. I am saying this much in answer to Deputy Norton. He talked about thousands of pounds being divided between the directors. That money only applies to the executors, and the sum is specifically mentioned there.

Mr. Norton

I am not too clear that the agreement does in fact make it applicable there.

Mr. Lemass

It refers to the managing directors.

Mr. Kennedy

Yes, to the managing directors and in one case it is specifically set out who are the executors. Deputy Cosgrave made a reference to what the State was going to lose. I say that it is a gilt-edged investment for the State. Whatever money the State puts into this investment is gilt-edged and the Minister for Finance has never made a better investment than this. He has four companies with assets of practically £500,000. The British companies had a monopoly of Irish insurance. I want to say this much now that, with limited resources, with limited capital and with limited subscribed capital the Irish companies had, all of them did trojan work. They were up against English companies in the field. Deputy Cosgrave referred to the time of Sinn Féin. I would remind Deputy Cosgrave that the appeal that time was to support everything Irish and people invested in Irish companies for patriotic reasons even though offered better terms by English and other companies. Against that opposition the Irish companies have survived. Leaving out altogether the question of the directorate I say here that you have as good a staff in the Irish companies as the executive staff in the offices anywhere else in the world. I do sincerely hope that if English companies do come in—I am sure the Minister will see that they do—that the Irish executive staff will not be crushed out. These men, up to very recently, all worked for very little. While the companies were being built up their salaries were very small. They had every inducement to go to English or foreign companies but they did not go. Many of them were in foreign companies and came in and worked for the Irish companies at the time of Sinn Féin when these companies were first started. I hope now that in this national scheme that everybody concerned will see to it that the existing staff are not pushed off. I fully recognise that when big companies like the Prudential or the Refuge come into the amalgamation—with far greater business each of them than the combined four Irish offices together—they will fight for complete control. It is only natural that they should. I hope when that day comes that the men who, with very small salaries, worked so hard for the last 15 years will not be crushed out. I do not intend to repeat what I said in the beginning of my remarks—that these four companies though not actuarially sound in 1936 would in ten years be found, each of them, actuarially sound and in a lesser period one of them would be actuarially sound. I want to stress to the House that when this Act begins to operate it will be for the benefit of the policy-holders and I hope that the employees who have made such a good job of Irish insurance will find that their services will be continued while fit for service.

Mr. Davin

I cannot remember that Deputy Kennedy during the discussion on the 1936 Bill made any protest against the passage of that measure in the interest of the policy-holders in the companies now involved.

Mr. Kennedy

I spoke at considerable length.

Mr. Davin

I am almost certain that the Deputy did not speak in opposition to the Bill and that he did not speak in the manner in which he has now spoken. I understand the Deputy is a member of the directorate of one of these companies——

An Ceann Comhairle

That has nothing to do with the business of the House.

Mr. Davin

The only reason I am making this point is that Deputy Kennedy is not in a position to give us any positive assurance in regard to the future liability of the State in connection with the Bill now before the House. I would like Deputy Kennedy to inform the House if before the Bill was introduced in 1936, or since the companies concerned, or any one of the four companies now involved, had an actuarial investigation into their financial position?

Mr. Kennedy

That is submitted every five years to the Department of Industry and Commerce.

Mr. Davin

Is Deputy Kennedy in a position to inform the House, or is he in a position to furnish any particulars to the House as to what was the nature of the report that time or since 1936 in regard to the companies of which he has any knowledge——

Mr. Kennedy

The nature of the report was that the licence was renewed.

Mr. Davin

I cannot imagine that a Minister of the State would come forward with a Bill of this kind to amalgamate, compulsorily, insurance companies if he were satisfied that any one of the companies involved was actuarially sound now and was actuarially sound at the time. I am not taking into consideration at all the opinion of the directors. What I want is the opinion of the experts who are, as Deputy Kennedy admits, called upon every five years to report on the future of these companies. Is the Deputy now in a position to say that there is an actuarial report at the moment in the office of any of the four companies to say that any of these companies is actuarially sound?

An Ceann Comhairle

This is not a cross-examination of the Deputy and it is not for him to answer. Neither is it the duty of the Minister who is responsible for introducing this legislation and putting the Bill through the House to reply to question of this kind. The fact that Deputy Kennedy is a director of one of the companies does not mean that Deputy Davin may question him. In any case Deputy Kennedy has already spoken and may not participate again in this Debate on the Second Reading. I assume Deputy Davin's questions are rhetorical.

Mr. Davin

I asked the question because the Deputy was prompting the Minister. I am asking Deputy Kennedy as a person with some kind of expert knowledge and experience of the working of insurance companies if he is in a position to answer a very pertinent question——?

An Ceann Comhairle

Which the Chair will not allow him to answer.

Mr. Davin

Well, that protects Deputy Kennedy.

An Ceann Comhairle

By following the ordinary rules of debate in this House.

Mr. Davin

I realise that there is a necessity for some kind of legislation to protect the policy-holders concerned. I would like to ask the Minister—I was going to ask somebody else—why it is that £30,000 worth of shares which the City of Dublin company has in a North of Ireland company are not being taken over as assets by the participating companies? I have no objection personally to reasonable compensation being paid to the directors of a company if that company is solvent or actuarially sound. I share the view of my colleagues and their strong objection to this generous measure of compensation being provided for the directors of a company, if the company is, at the moment, in a semi-insolvent or insolvent state. Deputy Norton has covered the ground from that point of view fairly fully and I wait with interest the Minister's reply to some of the questions in connection with the matter of compensation which Deputy Norton has asked him to answer.

Mr. Esmonde

I am concerned with one aspect of this Bill. It is a very difficult Bill to construe, by reason of the fact that all the important matters with which we have to deal are contained in the Deed of Agreement which is in the Schedule. There is one aspect of the Bill which I think is appropriate for discussion at this time, because it concerns the general policy of the Bill. As I understand this Bill, it is one of a series of legislative proposals which we have had in this country during recent years under which the Government for the time being departmentalises, if I may use the expression, certain public services in the State. It is insurance in this case. It was the supply of electricity in another and, to a minor extent, the amalgamation of the railways in yet another. What we have to guard against in this country, particularly in the setting-up of these various organisations, is peaceful penetration from outside. In this case it is the amalgamated company. I refer now to the company that is called the Terminating Company. The question of the directors of this company, the persons who are to guide the policy of this company, is in my opinion a most important one.

In order to ascertain who are the persons entitled to be directors, one has to look to the agreement in the Schedule and to that portion dealing with the Articles and Memorandum of Association of the Terminating Company. I have no objection, if you like, to one non-citizen of this State being a member of the board of directors by reason of his international reputation as an expert, but as the matter stands at present, nine directors are permissible and four of these are entitled to be citizens of a State other than our own. In a matter of this kind, I think it is not a question of the majority of the directors being nationals of this State; I think practically all the directors should be. That is an aspect of the Bill which I should like to place before the Minister. I realise the difficult position in which he finds himself. Four companies have met together and they have presented him with a fait accompli. He has undertaken to give legislative effect to that in the Dáil and to make any alteration now in the Deed itself would involve his going back to the companies and getting their consent to such alteration in the Deed. I do submit, however, that we should not accept the principle here that in undertakings of this character, which after all are of a semi-State character, there may be four directors who are not citizens of this State. The same remarks apply equally to any other service such as the Electricity Supply Board, the railways, etc. It is not in any spirit of criticism of the arrangement that has been come to that I make these remarks. I realise that the Minister must have had great difficulty in arriving at an agreement with the various parties and interests concerned. It is merely because I do not like this principle being accepted by this House that I make these few remarks.

Mr. Linehan

There is one point upon which I should like to get some information. I did get a certain amount of information from Deputy Kennedy but his was about the naïvest explanation I ever heard. He attempted to show that the State was entering into a gilt-edged investment. He said that the State would be under no liability as regards compensation because compensation would come out of the assets of the participating companies. If Deputy Kennedy had read the Agreement and then read section 5, which provides for the payment of money by the Minister for Finance, he would find that the Minister for Finance advances money to the Terminating Company to make up a deficiency, a deficiency of any one of the participating companies. The deficiency is ascertained by a formula in the agreement, signed by the directors of the companies and the formula sets out as an equation, the net assets of the Participating Company divided by the liability of the Participating Company, multiplied by the goodwill. Now the compensation payable to the directors comes out of the assets of the Participating Company, and if that causes a deficiency, then it is the money advanced by the State that will meet that deficiency. If there was no deficiency no money would be required from the State. If the company was in a position to meet any demand for compensation and there was no deficiency no money would be required from the Minister.

Mr. Kennedy

It comes in as share capital on the part of the State.

Mr. Linehan

The Minister for Finance will advance a certain amount to the company if there is a deficiency and in return he will get shares. The only assurance that this House has, on being asked to invest public moneys in this company, or to give public moneys to a participating company, is Deputy Kennedy's statement that it is a gilt-edged investment. We have been asked to vote this money on the assurance that this is a gilt-edged investment. Now if the participating companies were such a gilt-edged investment, there would be no necessity for this legislation at all. This House would not be asked to guarantee the compensation because it would come out of the assets of the participating companies. Everything that comes out of the assets reduces the assets and possibly increases the deficiency. The money the State is asked to provide is the deficiency between the assets and the liabilities. I should like to know from the Minister if he can give us any indication of what the amount of money required by Section 5 is likely to be. Further, if he cannot give us that information, he can tell us what is the relation between the amount of money to be advanced under Section 5 and the amount of the shares the Minister for Finance will get in the participating companies because there is a provision in the agreement which says that the Minister for Finance will get all these shares with voting powers. The agreement says:

"In consideration of the Minister for Finance having undertaken the liability for the deficiency and having taken the necessary steps to render the amalgamation possible"

—by advancing the money if there is a deficiency—

"and bring it about, the Terminating Company shall allot to the Minister for Finance or his nominee all the B shares"

—which carry voting powers—

"and such number of A shares of 2/- each as shall be equal to whichever be the lesser of (a) 99,900 shares, and (b) 5 per cent. of the total issued capital of the Terminating Company."

I want to know from the Minister if it is possible that the amount required from the Minister for Finance to make up the deficiency would be twice as much as the value of the 99,900 "A" shares or the 5 per cent., or would it be ten times as much. The Minister can get whichever is the lesser—the 99,900 shares or 5 per cent. of the total issued capital of the Terminating Company. In either case it is not a very large amount of money, but can the Minister give us any indication at all as to how much money is likely to be required, and that will have to be voted by this House in order to implement Section 5? Secondly, taking the present position of the four participating companies, how much money will be required by the fact that in this agreement arrangements have been made for the payment of fairly large sums to the directors of the various companies? If, as Deputy Kennedy says, the whole thing is going to be such a gilt-edged investment for the State, and if the State is not going to lose anything on the 99,900 2¾ per cent "A" shares or on the "B" shares—if, as the Deputy would lead us to believe, the position of these companies in the future is going to be as commercially sound and as rosy as they are actuarially sound—I find it very hard to see why any of them should want to amalgamate or want legislation of this sort at all.

This is a Bill to implement an agreement already arrived at, an agreement which cannot be altered or changed. It says that the Minister shall do certain things. It lays down that the Minister for Finance shall advance certain sums of money. It lays down the compensation that the directors shall get on the termination of their employment and the compensation which other employees shall get. Before committing myself to vote for this measure, I should like to know from the Minister, first of all, what amount of money will be required from the Minister for Finance; secondly, what proportion does that bear to what the Terminating Company will give in shares or share values, and, thirdly, what proportion of that is rendered necessary by the fact that compensation is arranged for the directors in this agreement.

An Ceann Comhairle

Before the Minister replies, I should like to deal with a query that was put by Deputy Norton. It is obvious that the Chair could not, in advance, give a decision as to probable rulings on amendments not yet submitted. However, it was to a matter of principle that Deputy Norton directed his question. If the Deputy peruses the first two lines of the Title, he will see that this Act purports to give statutory effect to an agreement. There are two parties to that agreement. This House cannot alter the agreement, but can of course reject it. Serious consideration will be given to any amendment submitted, but, speaking offhand, it seems that no amendment submitted to the scheduled agreement would be accepted.

Mr. Norton

Even though——

An Ceann Comhairle

I have indicated to the Deputy my view. If amendments are submitted they will receive careful consideration, but if the Chair remains of its present opinion such amendments will not be accepted.

Mr. Norton

I would ask you for a ruling on this point. It looks to me from this agreement, to which the Minister for Finance is also a party, that the deficiency to be made good by the State will be paid out of the Central Fund, and I presume that the passage of the Money Resolution on this Bill will be the authority for the State to finance the deficiency in this company. To that extent, therefore, I submit that the House is really voting money to finance this company, and I think it is rather unusual if a Deputy in the House has not the opportunity of deciding by means of an amendment in what way the State's money is to be directed in the payment of compensation to the directors and employees of the company. If it be possible, I urge that members should be permitted to submit amendments because the State is going into this thing and is committing itself to an unknown and an unnamed amount.

An Ceann Comhairle

As the Deputy is aware, this procedure is not unprecedented. We have had many such measures in the past when the House took agreements as a whole or rejected them. Deputies will have that opportunity on this measure. They can decide to take the agreement as a whole or reject it. That is my opinion.

Mr. Lemass

Deputy Mulcahy inquired why it was not possible to get an amalgamation scheme covering all the Irish offices. I do not think it would be practicable in the time available to me, or in fairness to all concerned, to express an opinion upon that matter at any length. I regret that the agreement before the House does not provide for the amalgamation of all the Irish offices, but I am not without hope that the provisions of the Bill, which permit of other companies participating in the amalgamation, may yet be availed of so as to bring about a complete amalgamation of industrial insurance business here.

The Deputy also referred to the difficulty which he had in discussing the Bill while negotiations were proceeding with the British companies carrying on industrial business here with a view to their participating in the amalgamation and transferring their existing business in this country to the new company. The principle of amalgamating all industrial insurance offices was approved of by the Dáil in 1936. In fact the Act which was passed in 1936 contained provisions to facilitate any such amalgamation, and discussions have been proceeding not merely between the Irish offices but between my Department and the English offices concerned since then. I am confident that the British companies concerned may yet participate in the amalgamation. I do not think that the fact that no formal agreement has yet been made need deter the House from discussing the Bill frankly. In fact, the enactment of this Bill by the House is a necessary preliminary step to the conclusion of negotiations with the British companies concerned.

Deputy Norton asked how long it was intended that the temporary company, as he called it, would remain in existence, and if it was the intention of the Government that power to direct the policy of the Terminating Company would remain indefinitely in the hands of the Government, or would eventually be transferred from the hands of the Government to private interests. I do not think the Deputy quite understands the machinery of the Bill. The Terminating Company, which is to be set up, will operate until all its liabilities have been discharged. It might be said, although it would be entirely incorrect, that that period represents the longest period that any person holding a policy in an Irish Company is likely to live. That statement will give an indication of the length of time it will probably take to clear off all the liabilities of the Terminating Company, and when these have been liquidated it will then have fulfilled its functions. The permanent company will remain permanently in existence doing new business, and the position in which effective supervision over its policy can be exercised by the Government will continue, so far as this Government is concerned, indefinitely.

I do not want to lay down policy in this regard for many years in the future, but I cannot see circumstances arising in which any Government which may hold office here will consider it good policy to sell its interest in that company to private parties. There were many references to the provision of the agreement in connection with the compensation to directors of the amalgamated companies, and to the provision for the staffs of the amalgamated companies.

Before I deal with these matters it is necessary to make the minds of a number of Deputies clear as to what precisely the agreement in the Bill provides. Deputy Linehan is doubtful whether the shares which will be transferred to the Minister for Finance will be valuable assets. The Deputy said he was not prepared to take Deputy Kennedy's assurance in that regard. I am not asking him to take Deputy Kennedy's assurance. I am asking him to use his own common sense on the question. Here is a company which will be operating a closed fund. It will undertake no new business at all; it will have transferred to it the liabilities of the amalgamated companies, and, as against the liabilities, assets to cover them in full. I think it is clear that in the course of time the shares of that company will acquire a substantial value, so clear, in fact, that in another connection I have officially committed myself to recognise that. The fact that they have a nominal value of two shillings is of no significance. As I explained, the reason for putting the nominal value low as against items in the balance sheet of the company is that goodwill items must appear; but it is hoped that in the process of time that goodwill will be eliminated. As time proceeds, the value of the shares will grow. Clearly, the company could operate a policy which would enhance their value rapidly, but it would do so at the expense of the policy-holders. I do not expect it will follow such a policy. I hope it will not. But, even by a policy operated in the interest of the policy-holders, a substantial accumulation of assets could be expected, assuming that the company is well and properly managed, and I have no reason to expect the contrary. The Minister for Finance gets these shares in consideration of the amount advanced by him against the deficiencies of any of the amalgamating companies. In addition to the shares that he gets in consequence of the advance, he gets the 100,000 shares which caused Deputy Linehan some concern. These other shares amount to 100,000, or five per cent., whichever is the lesser.

Mr. Linehan

If the Minister would excuse me I could make the point clear.

Mr. Lemass

I am quite clear on the point.

Mr. Linehan

It is on what is in the agreement.

In consideration of the Minister for Finance having undertaken the liability for the deficiency, and having taken the necessary steps to render the amalgamation possible and bring it about, the Terminating Company shall allot to the Minister for Finance or his nominees all the "B" shares and such number of "A" shares of 2/- each as shall be equal to whichever be the lesser of (a) 99,900 shares, (b) five per cent. of the total issued capital of the Terminating Company. All such shares shall be allotted as fully paid up...

Mr. Lemass

He gets these two blocks of shares in consideration of the fact that he has stepped in to deal with this business, and to facilitate the amalgamation. He gets the other shares in consideration of cash. As against cash he gets shares. I am quite clear that that is precisely the position.

Mr. Linehan

If the Minister will point that out in the agreement——

Mr. Lemass

It is in the words the Deputy read out. He gets shares not in consideration of the cash advanced, but in consideration of having facilitated amalgamation.

Mr. Linehan

In consideration for having undertaken the liability. That is cash advanced. I submit it is the same.

Mr. Lemass

The Deputy will have to take my word for it.

Mr. Linehan

The Deputy cannot take anyone's word when it is here in black and white in the agreement.

Mr. Lemass

The Deputy will have to consult those who put that interpretation on it, and he will not have to go very far for expert advice. Many questions have arisen as to the actual position of the companies amalgamating. It is impossible to say to what extent their funds are deficient until the test provided for in the agreement has been applied. It is known that some, at least, of the companies will show a deficiency under that test, and that they will be unable to transfer assets equivalent to the liabilities transferred. It does not follow, as Deputy Cosgrave assumed, that the policy holders of the companies have lost anything yet. What does follow is that there is reasonable assumption they will lose if ordinary expectations in that regard are realised. The solvency of insurance companies is based on two calculations, one relating to the earning powers of the assets, and the other to the expectation of life of human beings. The liabilities are calculated on certain expectations of life, and the assets are valued, having regard to a certain percentage of returns which might be anticipated.

On that basis a company could show a deficiency while still able to meet liabilities arising without undue difficulty. Most insurance companies, in fact, for a substantial period at the beginning of their career are in the position of having an actuarial deficiency while able to meet current outgoings without difficulty. Deputy Cosgrave was also confused as to the relationship of the paid up capital of the companies to the assets. Their assets are, of course, substantially in excess of paid up capital, even in cases where companies have a substantial paid up capital. The amount of money which it is anticipated will be required to meet the deficiency is about £500,000. That was the maximum amount provided in the 1936 Act and I think will be the maximum. There is no relationship between figures of that kind and the total subscribed capital of the participating companies. They will be transferring assets of substantial magnitude, even though these assets are less by £500,000 than the liabilities transferred.

This amalgamation was considered necessary in 1936 first because of the provisions of the 1936 Act and their probable reactions on insurance business here, and secondly because of the known weakness of the Irish companies, a weakness which was bound to become greater when the onerous provisions of the 1936 Act came into operation. It was the fact that it was known that these provisions were about to come into operation, together with the additional powers given to the Minister for Industry and Commerce under the 1936 Act to wind up insolvent companies, that produced this agreement although it must not be assumed from that that all the companies participating in the amalgamation are insolvent at present. That would not be the case, but the companies concerned, facing the coming into operation of the provisions of the 1936 Act, designed to protect policy-holders, and knowing that the conduct of their business was going to be more difficult and more expensive, agreed to participate in this amalgamation. Remember it is in a sense a voluntary amalgamation. There were other courses open to each of the companies concerned: they could have faced a winding up. It might have been in the interests of the shareholders of these companies to have wound them up rather than to participate in the amalgamation, although I think if any such course had been contemplated by the companies concerned we would have had to face the question whether we were not obliged to bring to the Dáil legislation which would secure that the assets would be available for the policy-holders in priority to the shareholders. However, the question does not arise now and consequently we are presented with this agreement, an agreement of which I have approved. I do not want to give the impression that it was merely a case of the companies coming together of themselves and presenting an agreement which I approved. Right at the very start of the business I told the companies the kind of agreement I would approve of and that it was useless for them to submit any other kind and, consequently, it was on the basis of the intimation of the nature of the agreement I contemplated, given in 1936, that the companies worked.

Now, they have provided for compensation for their directors upon terms which some Deputies consider generous. I have no particular desire to defend and certainly no desire to criticise the directors of these companies. Some of these companies had unfortunate experiences. Their boards did not always act wisely in their interests but it would, I think, be wrong to assume that the existing directors are in any case those responsible for the weakened positions in which they now find themselves. In fact, in the case of some of these companies, even those that show an actuarial deficiency and which can be said to be weak, the existing directors stepped in when conditions were much worse and have succeeded in keeping them off the rocks even if they did not get them floating safely in calm waters.

It is correct that the provision of that compensation is at the expense of the shareholders of the company. It is quite true that the more that is given in compensation the greater is the deficiency that will be shown and, consequently, the greater the amount that the Minister for Finance will have to provide, but, against what the Minister for Finance provides, there come shares in the Terminating Company, shares which would otherwise go to the participating companies and be available as assets for the benefit of the shareholders of those companies. It is on that account necessary to emphasise that these shares have a real value. As Deputies are aware, some of these participating companies have carried on or are carrying on other forms of insurance business and will perhaps remain in existence for the purpose of conducting these other forms of insurance business and, in that connection, because of the provisions of the 1936 Act, there arose for me a question for decision as to whether the available assets would be sufficient to justify me in giving a licence—a licence which would be required under the 1936 Act —to carry on these other forms of insurance business. I decided and, I think, properly decided, that we could regard those shares as having a definite value which would have to be taken into account in determining the extent of the total assets available for the purpose of enabling the companies to undertake these other forms of business.

Some reference was made to the directors to be appointed to the new companies. The names of certain persons appeared in the newspapers and in that connection I would like to make the position clear to Deputies. I start off by reminding them that there are two companies—the Terminating Company, which has been brought into existence, and the Permanent Company, which has not yet been brought into existence. The persons whose names appeared in the newspapers will be directors of the Terminating Company. That company will not be conducting insurance business. It will be conserving its assets. The actual conduct of the business relating to the policies transferred to it will be done by the Permanent Company as agents for the Terminating Company. The main function of the board of that company will be to safeguard its assets, to look after the investment of the funds and generally, to see that its business is safely and properly conducted. The persons whose names appeared in the paper do not represent the full board of that company. The full board has not yet been appointed and, of course, nobody has yet been nominated for the board of the permanent company that will be carrying on insurance business in the future. I think it will be desirable to have associated with the direction of these companies persons who have got experience in the insurance business, but one could exaggerate to a very great extent the importance or the desirability of confining membership of the boards to persons with such experience.

As regards the employees, I think Deputy Norton was quite unfair in his remarks. We are proposing here that all employees of the existing companies who can be fairly said to be depending for their livelihood upon the insurance business are going to remain in that business. Those employees are not being offered the alternative of work or compensation or, if they are, it is an alternative for themselves to choose. Every person who has been earning more than 20/- a week, who has more than two years' connection with the insurance business or is under 60 years of age, is offered employment. He may choose to accept compensation, but, if he elects to take employment, employment cannot be refused to him —employment at the same remuneration as he is now getting. In order to ensure that there will be no subsequent victimisation of these persons a board of referees is provided for and the scheme of amalgamation ensures that none of these persons who will be transferred to the new company can be dismissed for redundancy. They may be dismissed for other reasons, but if there is any doubt as to whether other reasons existed or not—any doubt in the mind of the employee as to whether or not redundancy was responsible for his dismissal—he has an appeal as against his managers to this board of referees. I think the scheme, therefore, provides adequate safeguards to ensure that none of these employees will be put out of the insurance business because of the amalgamation scheme. That does mean inevitably that the new company will have surplus staff. They will have to carry for a long period of time a much larger staff than would ordinarily be necessary. Deputy Cosgrave assumed that adding the business of company A to company B and company D would involve also the adding of their staffs in order to carry on that business. That is not so. In fact, one of the advantages of the amalgamation is that it makes possible a reduction of the working expense ratio. The trouble with these companies, as with all small companies, and not merely in Ireland, but elsewhere, is that their working expense ratio is too high. That has been the difficulty of these companies here. In insurance it is a fact that close alliance is a source of strength, and by this amalgamation it is hoped it will be possible not merely to reduce the expense ratio but also to bring into full operation the safeguards against the abuses of the past which the 1936 Act provided for and institute a system of operation which will eliminate the cause of those abuses. The cause was the intense competition between rival companies. The reduction of that intense competition reduced the abuses and the elimination of the abuses involves the elimination of the competition. That is why we set out to secure this amalgamation. I hope we will be successful. At any rate, we are going to create an organisation—it may not be the only organisation—but it will so predominate in this field that it will be effectively able to ensure that only proper methods of business may be resorted to.

Mr. Corish

Will every employee be transferred, no matter how long or how short they have been with companies?

Mr. Lemass

In the case of employees with less than two years' service, or in the case of those over 60 years of age, the company may elect to give them compensation or may offer them employment.

Mr. Corish

They are not bound to offer them employment?

Mr. Lemass

No. In the case of persons who get very small remuneration, persons getting less than 20/- a week, the same applies. It is open to the participating companies if they wish to make some additional provision for those persons. Some companies may have superannuation schemes, which will be the subject of separate agreement—either the transfer of the funds of the superannuation scheme to the amalgamating company together with the liability against these funds, or they will retain them themselves and carry the liabilities themselves.

Mr. Davin

Does the guarantee cover part-time agents?

Mr. Lemass

It covers everybody earning over 20/- a week who has had two years' connection with the business and who is under 60 years of age.

Mr. Davin

Including part-time persons?

Mr. Lemass

Everybody. Deputy Cosgrave raised a very big question when he asked in what way this country gained by the establishment of Irish insurance companies. I would not like to discuss that here and now. Apart from the question whether it is better to have industrial assurance carried on by Irish instead of English companies, there is no doubt it is best to have it carried out by one office. The experience of this country and every other country has been that undue competition between competing organisations in the matter of industrial assurance leads to abuse, abuse which has called forth many enactments, not merely here but elsewhere. We are going to get that amalgamation to a very great extent.

In that connection, Deputy Esmonde's remark calls for attention. He referred to what he described as peaceful penetration. I do not know if he is using that phrase in the sense in which it used to be used, implying a gradual incursion of a British or other foreign interest in our affairs. It does not apply in this case, because we hope that there will be transferred to this Irish company the industrial assurance business that is now carried on by the number of British offices here.

Various questions were asked which might well be postponed to the Committee Stage. Deputy Davin asked about the shares in a Northern insurance company owned by one of the amalgamating companies, and which are not being transferred. I do not want to deal with that matter at any length, but we do not think that these shares represent a desirable asset to have transferred to the amalgamated company, for reasons on which I would rather not dilate at the moment.

Some comparison was made between the provisions for the compensation of directors and executives, and the provisions for the compensation of staffs. There is a fundamental difference in each case. In connection with the staffs, we are giving them not merely the right to compensation, but the right to employment. The directors and executives are being given no such right. If they did get corresponding employment in either the terminating or the permanent company, then the amount of compensation to which they are entitled is reduced, or they get no compensation at all. They are given no such right to employment as members of the staffs are given and, consequently, there is not a useful basis for effective comparison between the two provisions.

Deputy Mulcahy referred to the case of certain employees in an insurance company who have already lost their employment. I do not think he was quite clear as to the circumstances of the case he referred to. I am familiar with the case. One of the companies participating in the amalgamation scheme carried on, in addition to life assurance business, a general insurance business. It is true that the 1936 Act made it illegal for any company to carry on, at the same time, both life insurance and the industrial assurance business. It is also true that portion of the 1936 Act has not yet been brought into operation.

This company, possibly in anticipation of that, and possibly in anticipation of transferring its life assurance business under this scheme, decided to dispose of its general insurance business to another Irish office. It did so. It was a voluntary arrangement on its part, and I do not think we could accept liability for any of the members of the staff which the company to which its business was transferred did not choose to take into their employ. It was open to that company to have disposed of its life assurance business under this scheme, and continue to carry on the general insurance business. It did not choose to do that. It is quite clear that it is not a matter that arises on this Bill, nor would it be in any sense equitable to impose against the life funds of these companies a charge for the compensation of these employees.

I do not think there were any other points that I would like to deal with at this stage. We will have an opportunity of considering the various sections in detail on the Committee Stage. The Bill has apparently been approved of in principle by the members of the House, and I think we can deal more effectively with matters of detail on the next stage.

Mr. Corish

If this company desired to keep on an agent who has less than two years' employment in one of the companies, or has less than the rate mentioned, is there anything to prohibit them taking him into their employment?

Mr. Lemass

There is nothing to prohibit them keeping anybody in employment. It is quite possible that in the case of an officer whose services would be of advantage to them, they might elect to offer him employment instead of compensation.

Mr. Corish

I am not now talking of people entitled to compensation.

Mr. Lemass

With regard to people over 60 or having less than two years' employment, they may elect to offer them employment.

Mr. Linehan

I have gone carefully into paragraphs 25 and 26 of the agreement, and I would ask the Minister to read them and see if there is not an entire ambiguity; there is the same consideration for two different things. First of all, it is specified that in consideration of the payment of money to make up the deficiency, the Minister will get so many shares, and, pending the final ascertainment, there shall be allotted to the Minister only 60 per cent. of the shares to which he would be entitled under the provisional valuation. In the next paragraph it is provided that in consideration of the very same thing, plus taking the necessary steps to render the amalgamation possible and to bring it about the Terminating Company shall allot to the Minister all the B shares and such of the A shares of 2/- each as shall be equal to whichever be the lesser of 99,900 shares or 5 per cent. of the total issued capital. Is there not a terrific ambiguity between the two articles of the agreement?

Mr. Lemass

There is no possibility of ambiguity.

Mr. Linehan

In consideration of his making good the deficiency, certain things shall be given to him.

Mr. Lemass

The section provides that because he has facilitated this amalgamation scheme he is going to get, in addition to the shares for which he has paid, further shares amounting to the number of 100,000, or 5 per cent., whichever be the lesser, and he will also get the whole of the B shares.

Mr. Linehan

Giving him the voting power.

Mr. Lemass

He gets both the shares for which he pays and these other shares against which he makes no payment at all but which are given to him as a promoter.

Mr. Linehan

Assuming that is 100 per cent. correct, is there not still a possibility that all he gets will not be value for what he may be called upon to give?

Mr. Lemass

As against every £1 he gives he gets a 2/- share, but the actual value of the share has nothing to do with the 2/- the value will depend on the circumstances of the company at the time. It may, and possibly will, be worth more than £1. As against each £1 he gets a 2/- share. In addition, he gets the 100,000 shares and the whole of the B shares.

Mr. Linehan

We are asked to vote the money on a supposititious value: that, in the view of the Minister and Deputy Kennedy, the thing is a gilt-edged investment.

Mr. Lemass

It is desirable that the money should be voted for the purpose of the scheme, in any event; but apart from that, I am satisfied that these shares will prove to have been of real value.

Mr. Linehan

Even if we lost the money it would still be desirable?

Mr. Lemass

Yes, it would be desirable, but there is no fear of that.

Question put and agreed to.

An Leas-Cheann Comhairle

Committee Stage?

Mr. Lemass

This day week.

Mr. Corish

Would the Minister agree to give a longer interval?

Mr. Lemass

I understand that there is not much business for the Dáil this week. The Bill, of course, must be law, or must be through this House and the Seanad, before the end of the year. Would to-morrow week be preferable?

Mr. Linehan

This Party is anxious to have as extended a period as possible.

Mr. Lemass

The Dáil might agree to order it for to-morrow week, and the matter could then be discussed in relation to the amount of business. If there is not enough business on Wednesday to carry the Dáil over to Thursday, it could be left over until the following week. I am anxious to get it through fairly quickly in order to proceed with the completion of the agreement with the other companies and to get the amalgamation scheme into force. The only essential is that it should be law before 31st December, because the agreement disappears if the Bill is not law by then.

Mr. Corish

Could the Minister say when he proposes to take the Committee Stage of the Holidays (Employees) Bill?

Mr. Lemass

I am prepared to discuss that with the Dáil. It is not so urgent in the sense that it cannot be brought into operation until the spring of next year.

Mr. Corish

I was going to ask that it be postponed until this day three weeks.

Mr. Lemass

This day fortnight, anyway.

Committee Stage ordered for Thursday, November 3rd.