Dáil Éireann debate -
Thursday, 19 Feb 1953

Vol. 136 No. 9

Committee on Finance. - Insurance Bill, 1952—Committee and Final Stages.

Section 1 agreed to.

SECTION 2.

Minister for Industry and Commerce (Mr. Lemass)

I move amendment No. 1 :—

Before sub-section (5) to insert two new sub-sections as follows:—

(5) For the purpose of providing money for any advance under this section the Minister for Finance may borrow from any person any sum or sums, and for the purpose of such borrowing he may create and issue securities bearing such rate of interest and subject to such conditions as to repayment, redemption or otherwise as he thinks fit, and shall pay the moneys so borrowed into the Exchequer.

(6) The principal of or any interest on any securities issued under this section and the expenses incurred inconnection with the issue of such securities shall be charged on the Central Fund or the growing produce thereof.

The Minister for Finance considers that this provision, which is in the usual form, is required in a Bill in the event of any charge falling on the Exchequer.

Mr. MacBride

That is the only purpose?

Amendment agreed to.

Question proposed: "That Section 2, as amended, stand part of the Bill."

Mr. Dillon

The Minister may remember that, on the discussion on the Second Stage of the Bill, a specific point was raised when he spoke of the insurance of goods designed for export. He said he believed that the risk which the insurer would be called upon to carry would be the value of the consignment, the retail or wholesale selling price and his attention was directed to the danger of that practice, lest the export insurance procedure would be availed of to dispose of merchandise to which a false value would be set. I think he undertook before this stage to look into that particular matter and to give us his view, having consulted those competent to give an expert opinion on it.

Mr. Lemass

The liability of the insurer will be to pay to the exporter 90 per cent. of any loss which may be incurred and which is attributable to the risk against which the insurance is being undertaken. "Loss" is defined as (1) in the case of goods actually delivered the contract price or gross invoice value as the case may be of the goods less the amounts which the exporter has received and less any sums or credits which the exporter is entitled to retain by way of set-off and (2) in the case of goods not delivered the contract price or gross invoice value as the case may be of the goods less any expenses saved by the non-fulfilment of the contract and less any sums recovered by the exporter. There will also be provision in the contract on the usual basis for the subsequent division of any salvage.

Mr. Dillon

This is a matter on which there must be experience available from other countries who have operated schemes of this character. It does appear, prima facia,that there is here a wide open door for fraud or attempted fraud. Suppose an exporter finds that he is possessed of a parcel of merchandise which is unsaleable in the domestic market and enters into an agreement with the consignee who shall be a man of straw, say, in Venezuela, that he will give him an order for these goods, and they agree that the contract value shall be £10,000. If the goods were actually valued in the ordinary market their unsaleability might make them worth no more than salvage, say £1,000, but the man of straw in Venezuela gives the order. The shipping documents are prepared. The goods are despatched. The man of straw in Venezuela repudiates the contract or simply goes through a form of bankruptcy, whereupon the consignor turns to the insurer and says, “Pay up.” Is there any machinery whereby thebona fidesof a transaction can be tested or thebona fidesof a purchaser at the other end can be tested?

Mr. Lemass

So far as insurance against ordinary commercial risk is concerned, the State does not come in. The insurance companies have formed into a group to do that business as an enterprise of their own. The State comes in only as insurer against political risks—the refusal of an import licence, the imposition of some restriction on imports after the goods have been shipped, the ordinary risks of revolution, war, or matters of that kind. We have not yet fixed the details of that scheme or even decided the full range of risks which will be covered. One of the problems is whether the insurance should cover the risk of fluctuation in exchange rates. The details will have to be worked out as soon as we have authority for the passage of this Bill. The insurance companies will operate as agents for the Minister for Industry and Commerce but the whole scheme will be supervised by Córas Tráchtála.

The intention is that insurance will not be given to anybody who does notgive the whole of his business with dollar countries to be insured under this scheme. Not so much individual consignments of goods but the whole of the business must be offered on the basis of 90 per cent. cover of the risks on payment of a premium to be determined. I think that under the British scheme the premium was 1 per cent. It may be higher here. They have adjusted their rates for the different countries, according to the calculation of risk. I think it would be possible to devise safeguards which would ensure that the danger of fraud will be minimised.

May I say that I was inaccurate in one respect during the course of my statement on the Second Reading? I said that there was no loss under the British scheme for over 20 years or so, that the premium income was sufficient to meet the outgoings. I notice, however, that they had an Estimate before Parliament last week to cover a loss arising, I understand, by reason of the failure of a certain South American country to permit payments. The loss may be recovered later on but, for the immediate present, the Board of Trade has to pay. Our scheme is based very largely upon British experience and, in every case where they made a mistake, I hope to provide adequate safeguard at the beginning.

All the points to which Deputy Dillon referred will be adverted to and details of the scheme, when they are being drafted, will be arranged with these points in mind.

Mr. MacBride

In the British scheme, operated by the British Board of Trade, is it provided that the whole of the business of a firm must be insured?

Mr. Lemass

I am not so sure about that. They may have some condition with regard to a specific market. Their scheme covers a much wider area of trade.

Mr. MacBride

Does the Minister not think that there is some difficulty, possibly some drawback, in insisting that the whole of the export business of a firm should be insured?

Mr. Lemass

In our case it would be only their dollar business. Weare starting to operate only for dollar markets. We expect them to insure the whole of their turnover in dollar countries. We have the desire here to spread risk—to ensure that the premium income will be adequate to cover the risk. The aim is to get the whole business.

Mr. MacBride

Did the Minister mention 1 per cent?

Mr. Lemass

That is the British rate. I think they have varied it from time to time as they estimate the risk in a particular country to be more than normal. Generally, it is 1 per cent. Sometimes it is varied for the purpose of discouraging people from seeking insurance in particular markets.

Question put and agreed to.

Sections 3 and 4 put and agreed to.

SECTION 5.

Mr. Lemass

I move amendment No. 2:—

In subsection (2), line 37, to delete "and 1936" and substitute "to 1938."

This is a drafting amendment.

Amendment put and agreed to.

Section 5, as amended, put and agreed to.

Title agreed to.

Bill reported with amendments.

Agreed to take the remaining stages now.

Question—"That the Bill be received for final consideration"—put and agreed to.

Question—"That the Bill do now pass"—put and agreed to.