Dáil Éireann debate -
Tuesday, 25 Jul 1961

Vol. 191 No. 10

Insurance Bill, 1961—Second and Subsequent Stages.

Minister for Industry and Commerce (Mr. J. Lynch)

I move that the Bill be now read a second time.

The Insurance Act, 1953, which this Bill proposes to amend, provides that, for the purpose of encouraging exports, the Minister for Industry and Commerce with the consent of the Minister for Finance, may make arrangements for giving guarantees in connection with the export, manufacture, treatment or distribution of goods or the rendering of services. Under the Act of 1953 the aggregate amount of the liability, at any time, of the Minister for Industry and Commerce for principal moneys may not exceed £2 million. The purpose of the Bill, which is now before the House, is to raise the statutory limit of £2 million provided for in the Act of 1953 to £5 million in order to provide for the growing demand for political risks insurance cover under the Act as a result of the increase in the volume of exports.

The aggregate potential liability of the Minister under political risks insurance policies in force at 31st March, 1961 was over £1½ million. Having regard to the increasing demand for insurance cover under the Act, it is probable that the limit of £2 million will be reached in the near future and it is necessary to raise this limit. I think that the new limit of £5 million is, in the circumstances, a suitable figure. The aggregate potential liability would, of course, become an actual liability only if all the risks covered by the insurance policies materialised. As Deputies will, no doubt, appreciate this is an entirely remote contingency.

The present Bill will facilitate the expansion of our exports by making possible the continuance on an increasing scale of insurance cover for exporters against certain risks. These risks, which are inseparable from the export trade, are of a type that cannot normally be covered by insurance or otherwise guarded against by commercial means.

I commend the Bill to the House.

Mr. Cosgrave

The proposal in the Bill will find general approval. There are just one or two matters which I should like to put to the Minister. Is it proposed to take steps to procure the establishment of a limited company to carry on the business of re-insuring assurance business provided for in Part VI of the Insurance Act, 1936? The requirements in respect of Part VI have, I understand, never been complied with. Is it proposed to establish a company to carry on that business?

Can the Minister say what sums have already been paid in respect of liabilities which fell to be met under the existing limit? As I understood it, he said a sum of £1,500,000 was the sum insured. Can the Minister say, if the actual figure is available, what has had to be paid and also if there has been any increase in insurance premiums for this type of risk? I do not know if there has been any change in this type of business but, if so, perhaps the Minister would be able to give the information we require.

Mr. Kyne

Can the Minister say who pays the premium?

Mr. J. Lynch

The exporter pays the premiums himself but the Minister, by arrangement with the insurance companies, takes on the risk.

Mr. Cosgrave

If there is a loss, is it?

Mr. Norton

The Minister mentioned that the State guarantees for a ceiling up to £2,000,000. It is now proposed to extend the ceiling to £5,000,000. I gathered from what he said our liability extends to about £1,500,000. Would the Minister say whether he would be able to meet any claim in respect of a political risk since the scheme was introduced and, if so, what was the amount of the claim and in respect of what area was the liability incurred? Could the Minister give us an indication as to the areas mainly covered by this risk. Could the Minister give us an indication of the far-flung character of the insurance? Could he give a picture of the areas mainly covered by the cover which the State is providing for the insurance company?

I should like to ask a third question on the lines of the question asked by Deputy Cosgrave. Is any consideration being given to the question of the State itself setting up an organisation, a State-sponsored body, which would carry this risk itself on the basis of insurance upon the exporters or of integrating this type of insurance company here, the capital of which is almost entirely State-owned, or is it the intention to allow them to proceed as at present, the State taking the risks and the insurance company taking the premiums?

Mr. J. Lynch

So far as the establishment of a limited liability company under the Act mentioned by Deputy Cosgrave is concerned, I do not think that is proper to this Bill, but as the Deputy is aware there is an amendment of the Insurance Act of 1936 being prepared at the moment. I cannot say offhand whether it is proposed to establish a limited liability company under the amending Bill, but I shall have regard to that fact, if it is my responsibility, when the Bill is being prepared in its final form before coming before the House. The premiums have not been increased. They have been maintained at the same level.

I think I was not completely correct in answering Deputy Kyne. The premiums are paid by the traders to the private insurance companies but are in turn refunded to the Minister. I think that that would take care of Deputy Norton's point. In effect, the State is getting the premiums, if there is any profit, but, on the other hand, the insurance companies are doing the administration. I think it is a satisfactory arrangement. They carry of course, the other risks involved.

So far as the liability that has accrued is concerned, there have been two cases. I dealt with one myself. I authorised the payment of the sum insured. It was in respect of, as far as I can recollect roughly £20,000 covering the export of beef to the United States. Because of certain administrative technicalities, the beef was not acceptable in the United States. Therefore, I considered that, under the circumstances, it was a political risk that ought to be borne by the moneys available under the Act.

Mr. Norton

How did the Minister classify that as a political risk? Everything would be political at that rate.

Mr. J. Lynch

I cannot remember all the details now. I mentioned £20,000. The £20,000 covered two cases. It was brought before me in the usual way at the Departmental conference. We discussed the matter and decided that in the particular circumstances it was covered. I cannot give the Deputy all the considerations that led me to the conclusion I came to. It was some time ago but I can assure the Deputy that the Act is administered in the spirit in which it was passed here. There was no suggestion whatever of trying to squeeze a claim in under the Act. There was an objective examination and a decision come to that it was a risk to be covered under the Act. These are all the points that were raised and all I can answer.

Mr. Cosgrave

What was the total sum involved?

Mr. J. Lynch

The sum of roughly £20,000 over two cases.

Mr. Norton

Could the Minister tell us what was the total premium income? When he has ruled off, are we in the red or otherwise?

Mr. J. Lynch

On the basis coverable—it was a sum of £1,500,000—it is hardly likely that our premium income exceeded the £20,000 paid out.

Mr. Norton

It did not?

Mr. J. Lynch

I do not think it did. There is a balance of £369,500 uncommitted. The annual increase in liability is running at about £334,000 per annum. That is the exact figure for the year ending 31st March, 1961. It is obvious that we will require to raise the ceiling. We are taking advantage of this occasion to ensure that I will not be coming back to this House too frequently.

Mr. Russell

Who decides when a risk is a political risk? Is that the Minister's decision?

Mr. J. Lynch

Yes. First of all, I might elaborate. Policies are issued only to persons or firms carrying on business in Ireland. Rates, premiums and conditions of premiums are decided by the Minister. Claims on the policies may not be admitted except with the approval of the Minister.

Agreed to take the remaining Stages today.

Bill considered in Committee.

Question proposed: "That Section 1 stand part of the Bill."

Mr. Russell

Will the £5,000,000 suffice?

Mr. J. Lynch

The rate of about £330,000 per annum I think would cover it for some time to come.

Question put and agreed to.

Section 2 agreed to.

Title agreed to.

Bill reported without amendment, received for final consideration and passed.

An Ceann Comhairle

This is a Money Bill within the meaning of Article 22 of the Constitution.