Dáil Éireann debate -
Thursday, 25 Jun 1964

Vol. 211 No. 6

Insurance Bill, 1964—Second Stage.

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

I move that the Bill be now read a Second Time.

The principal purpose of this Bill is to provide relief for the policyholders of the Equitable Insurance Company Ltd. As Deputies are aware, I presented a petition to the High Court in May, 1963, for the winding-up of this company on the ground that it was insolvent; shortly afterwards the necessary winding-up order was made by the court. Although the preparation of the legislation was prompted by the failure of this one company, Deputies will observe that the arrangements envisaged by the Bill are of a general and continuing nature, so that it will also provide suitable machinery for the relief of policyholders in the case of any future insurance insolvency. I need hardly say that there are no indications at present that any other insurance company will go bankrupt.

The liquidator of the Equitable Insurance Company is unable to give any reliable indication of the sums of money required to meet claims under the various classes of policies, mainly because the legal position in relation to certain liabilities and assets of the company is not clear. On a very rough basis, however, he feels that the net liabilities may amount to some hundreds of thousands of pounds. The Motor Insurers Bureau, which is representative of all companies doing motor business here, will, in accordance with the terms of a long-standing agreement with the Minister for Local Government, meet certain liabilities under motor policies, but this will still leave a substantial amount of claims unsatisfied.

It had been hoped that the other insurers would take over some, at least, of the Equitable's liabilities, and I had discussions with the Irish and British companies with this end in view before I presented the petition for winding-up. The Irish companies were prepared to contribute one-third of the amount needed to pay all creditors in full, provided the balance was contributed by the British companies and/or the Government. The British companies refused, however, to make any contribution whatever.

I was extremely disappointed that this attitude was adopted by the British companies who enjoy full facilities, on the same basis as our own native concerns, to conduct their insurance business here. In fact, they are to a certain extent shielded from excessive competition by virtue of the provisions of the Insurance Act, 1936. They take the lion's share of the non-life business arising here, the approximate division in recent years being about 80 per cent for the British companies, as compared with 20 per cent for the Irish companies. Despite all this the British companies made it quite clear to me that they would not, in any circumstances, voluntarily contribute one penny towards meeting the claims on the Equitable. The explanation they gave me was that they are opposed in principle to any arrangements for bailing-out any company which gets into difficulty, as this might lead in the future to the adoption of reckless practices by other insurance companies and intermediaries.

It is evident to me from correspondence received in my Department and from appeals made by Deputies in this House that unless some special steps are taken the failure of the Equitable will give rise to serious hardships for its policyholders, particularly in the case of persons who were insured with the company under employers' liability policies. I am satisfied also that the failure of an insurance company to meet its liabilities differs in many ways from the failure of an ordinary business concern. As is well known, insurance companies act in concert in many matters, including the rating of risks and the determination of premiums. Most insurance companies work on much the same principles, and exchange information one with the other. There is also the point that the insurance market here in Ireland is, to a large extent, reserved for the companies operating here. Furthermore, the law has, for many years, recognised that the insuring public are deserving of special consideration and protection, within the limits of a free enterprise system.

For these reasons, I have come to the conclusion that if the insurance industry itself will not voluntarily come to an arrangement under which the policyholders of the Equitable can be assisted, then it will be necessary to impose such an arrangement on them by legislation. Having given the matter a good deal of thought, it also seems to me appropriate that any machinery provided by law should not relate specifically to the Equitable but should be available to deal with any other insurance insolvency situation which may arise, however remote the possibility may be.

I have had further discussions with the insurance companies in regard to the introduction of legislation on these lines. Both the Irish and British companies were opposed to this course. For the reasons I have already given, however, I feel that it is right that, having failed to procure a voluntary scheme, I should introduce this Bill providing for a statutory scheme. I am satisfied that there should be no difficulty in so operating the proposed scheme, that in any given year the financial burden by way of contributions payable by individual companies will be quite small, and I believe that the arrangement envisaged by the Bill now before the House will not cause any serious financial problem for even the smallest company.

The insurance companies expressed the view that it would be unfair and illogical to require them to meet claims under workmen's compensation in view of the decision in principle made by the Government some time ago to expand the social insurance scheme by providing for payments to persons injured in the course of their employment. Although this decision has not yet been crystallised, I feel that there is some validity in the point put by the insurance companies, and the Bill, accordingly, provides for a State contribution which will be roughly equivalent to the workmen's compensation liabilities of the Equitable.

I have given this matter the most serious consideration and have listened carefully to representations from many sources. I am quite satisfied that the interests of policyholders must be adequately protected and that there is no compelling reason why the statutory scheme to relieve them should not be introduced. The main features of the scheme as envisaged by the Bill are as follows:

(a) All non-life licensed insurance companies will contribute to the fund in accordance with their premium income. A non-repayable contribution of £30,000 will be made to the fund by the State with the object of covering the Equitable's workmen's compensation liabilities.

(b) the fund will be available to meet claims under policies issued by any insolvent insurance company which is being wound up by the High Court; the eligible classes of insurance will be those for which a licence is needed under the Insurance Acts, other than life; creditors other than those claiming under eligible policies will not have access to the fund.

(c) As the annual contribution envisaged will not be sufficient to discharge the liabilities of the Equitable within a short space of time, the Minister for Finance will make loans to the fund to enable it to cover all outstanding claims without delay; these loans will be repaid to the Minister for Finance in due course.

The failure of the Equitable Insurance Company prompted questions about the degree of protection afforded by the existing law for policyholders in this country. I think we will answer those questions effectively by providing suitable statutory arrangements for meeting claims on insolvent companies. In order to improve the law further, however, I think it is desirable to do something about the present statutory requirements in relation to the deposits made by insurance companies.

The existing provisions in this respect require a deposit of £15,000 from each company doing motor business and a deposit of £20,000 from each company doing any one or more of the other controlled classes of business, except life and industrial business, where the deposit is £20,000 in respect of each. These figures were fixed in 1936 and are obviously too low by present day standards. The Bill provides, therefore, that a deposit of £100,000 shall be required from each insurance company, no matter how many classes of business it carries on. I gave some consideration also to the share capital requirements set out in the Act of 1936, but I am satisfied that it would not be feasible to do very much on this score, for the present.

In any event, it must be conceded that statutory share capital requirements do not provide any conclusive protection for policyholders since share capital can be lost in the normal course of business. The making of a deposit is in an entirely different category, since this requires the placing of cash or its equivalent in the High Court which retains physical possession of it for the sole benefit of claimants on the company.

Under the Act of 1936 certain licensing rights were given to existing Irish and British insurance companies, and there is a residue of these rights which has not yet been taken up. Bearing in mind the failure of the Equitable Insurance Company, I am satisfied that some tidying-up is called for in this respect. The Bill proposes, therefore, to provide that no new licences may be issued to any company, Irish or foreign, except in the case of a newly established Irish-controlled company satisfying the share capital and other requirements of the 1936 Act. The opportunity is also being availed of to make some changes in the Insurance (Amendment) Act, 1938 in relation to the connection between the Minister for Finance and the Irish Life Assurance Company Ltd.

I am confident that the enactment of these provisions will improve the existing law relating to the insurance industry, and will answer a number of criticisms which have been voiced in this House from time to time. I have no hesitation in commending it to the House.

Mr. Cosgrave

This Bill will be welcomed in so far as it is necessary to provide a means whereby policyholders who had insured with the Equitable Insurance Company will be protected. To that extent we are satisfied that it is necessary. It does seem, however, that there are a number of questions which require to be examined and, if possible, answers given to them. The fact that it is necessary to introduce this legislation because of the failure of the Equitable Insurance Company naturally prompts the question whether the statutory provisions which existed under the 1936 Act were properly implemented and also whether these provisions were complied with in full or merely in a formal manner.

In the 1936 Act, there are a number of sections dealing with the presentation by insurance companies of accounts and the examination of these accounts by the Minister for Industry and Commerce and by officers appointed by the Minister to carry out this examination and investigation.

From discussions which took place some time ago in the House, it did appear as if the accounts were examined by the Minister and that up to a short time prior to the bankruptcy or insolvency of the insurance company in question, these accounts disclosed no facts which would warrant the assumption that the company were in difficulties.

It seems to me, however, that the investigation or examination of the accounts should have disclosed the circumstances or at any rate the trend in the finances of the company which would at least point to the need for further and closer examination. It is hardly necessary to refer to the precise sections of the Act but it seems to me the sections which gave the Minister power were sections 87 and 88 and later sections dealing with foreign companies.

The question now arises as to whether these sections were adequate or whether the procedure adopted in connection with the presentation and examination of the accounts afforded sufficient information to the Minister and his Department to have available the requisite returns in order accurately to assess the circumstances of companies of this sort. One of the matters which from time to time have been the subject of discussion here, and indeed the subject of some consideration not merely by the House but by, I think, different Governments—certainly during our period of office—is the question of having statutory or semi-statutory or other bodies whose accounts were presented to the Dáil made amenable in one form or another to such investigation.

Generally, these investigations applied to statutory companies or companies regarded as covered by the terms "State" or "semi-State". In this case, while the insurance company might not come within that overall description, there was, as I have said, a provision in the 1936 Act for the examination of accounts and for the presentation to the Minister for Industry and Commerce of accounts, books, documents and so on, to enable a proper assessment of the position to be made.

It is difficult to imagine that if a full investigation and examination of these accounts were made, some evidence would not have been forthcoming which would disclose the situation that had developed. If, on the other hand, it is to some extent a formal matter—in many cases it may be that these matters, either through practice or recognised procedure, become a formality—then it is necessary at this stage, before we enact this piece of legislation, to consider whether the powers in the 1936 Act were adequate for the purpose originally envisaged.

If these powers are not sufficient, then it is essential we should in this legislation insert sufficient power to ensure the Minister has in the future adequate machinery for purposes of investigation so that not merely will no similar case arise in the future but so that power may be available to him to prevent, should the tendency disclose itself, any possibility of a similar happening in the future.

This decision to ensure that protection is provided for policyholders in the Equitable Insurance Company is just and fair because in many cases— probably in most cases—persons who insure with an insurance company and who find they have to meet claims are people in a small way of business, people whose resources would not allow or enable them to meet the claims they may have to face as a result of actions which may be taken against them.

In any event, irrespective of the financial standing of persons concerned, it is essential in the public interest, in the interests of the community generally as well as in the interests of insurance companies and business concerns, that those who place insurance with an insurance company should have no doubt about the financial soundness or the integrity of the company concerned. This Bill is obviously necessary to avoid hardship to claimants against the Equitable Insurance Company. It will provide relief for defendants in various types of legal proceedings, in particular for those whose business does not come within the cases covered by the Motor Insurers Bureau.

One of the problems adverted to in the course of the Minister's introductory speech was that in respect of persons covered for workmen's compensation. It would appear that aspect of the matter has been covered by proposals in the Bill. I gather from the Minister's speech that the figure of £30,000 which has been arrived at is calculated on the basis of the liability or the responsibility which would accrue to the Equitable Insurance Company. If that is not so, I hope the Minister will give details when he is replying. It did seem to us that the compensation fund would have been better administered by the insurance companies concerned rather than through the High Court and through the Accountant of the High Court. I understand from the Minister's remarks that the reason for a statutory fund is that the insurance companies concerned were not prepared to accept a scheme. This may well pose the question whether the whole matter of insurance should not be the subject of an inquiry.

Some years ago the Solicitors Bill established for the members of the profession a fund administered by the profession. The decision to establish that fund and the manner in which the solicitors' profession accepted responsibility for administering the fund reflected the highest credit on the profession. It is not a very easy matter to administer and, particularly, to administer a fund dealing in certain cases with problems created by either defalcation or in some way or other the mismanagement or neglect which individual members of the profession were responsible for but I believe that since that fund was established, it has been administered in a manner which has reflected credit on those who conceived the idea of administering it as well as on the profession and the officers of the Incorporated Law Society.

The fund referred to in this Bill has now to be administered under the auspices of the President of the High Court through the Accountant of the High Court. One of the criticisms made by members of the legal profession is that there is considerable difficulty in getting business transacted expeditiously through the Accountant's office. That is obviously because of pressure of business. Whether this fund will still further encumber the business of that office is open to question. Is it proposed to strengthen the staff there or to provide any extra machinery for dealing with this matter? If not, will it further delay the proceedings of the Accountant's office and further complicate, not merely the existing business which is channelled through that office, but also the business which will fall to be dealt with in connection with the fund established under this legislation?

I would be interested to know on what basis the contributions by insurers will be made to the fund or has this matter yet to be settled in consultation with the insurance companies?

The Minister, no doubt, has received, as have Deputies, a memorandum from the Private Motorists Protection Association. This memorandum refers to the application which was made by the Private Motorists Protection Association for a licence to carry on insurance business. The association refer to the fact that they have complied with the 1936 Act by lodging the required sum of £15,000 and that they also became a registered company. The Minister decided to postpone a decision on the application, pending the introduction of the present piece of legislation.

This organisation, which has been formed as a result of a view held by a number of people that motor insurance is too costly, is composed of a number of reputable persons who came together for the purpose of effecting motor insurance business and it seems that an adequate reason should be given as to why the body is not being granted a licence. They have complied with the terms of the 1936 Act and indicated some considerable time ago that they proposed to comply with the terms of the Act. Since then they have done so and they now await the granting of a licence.

When I express the view that the opinion is held that insurance is costly and that an inquiry might elicit certain information, may I say that it is well known that where insurance companies or insurance policies fall to be liable, particularly in the case of accidents happening to mechanically-propelled vehicles, costs tend to rise and if, say, a claim is made otherwise than by means of a policy of insurance the costs are generally lower. Whether it is a natural tendency of human nature to exploit the advantages of passing on extra liability to others may be difficult to say but to whatever extent added liability arises because people tend to charge up on the basis that the insurance company is liable to pay it then to that extent it must affect the cost of insurance.

On the other hand, as the Minister remarked, insurance companies here have very considerable opportunities and the fact that the British companies have declined to participate in the proposed arrangement is certainly worthy of comment. It seems to me that if facilities are afforded by means of legislation here to carry on business, then there is some obligation on those who are prepared to avail of the opportunities here and to carry on business to accept whatever consequences may flow from that, and to the extent to which it is necessary to have all insurance companies participating in order to operate this fund, it seems to me there is some obligation on the companies concerned to participate in it.

I noticed in the Minister's concluding remarks that it was proposed, as he put it, to implement certain rights under the 1936 Act which had not been taken up. I should like to know why these rights were not taken up and what provisions of that Act had not been complied with. Under section 12 of the Bill, it is proposed to enable the Minister for Finance to acquire by subscription or purchase and sell any shares of the Irish Life Assurance Company, Limited. What is the purpose of buying out this company? The reference by the Minister did not clarify the provisions of the Bill and did not specify the reasons for this proposed step.

There is one provision in the 1936 Act which was not implemented, that is, the portion in Part VI, sections 77 to 90, which deal with the insurance compensation fund. These sections provide for the formation by the Minister for Finance of a reinsurance company and section 89 of the Act provided that every assurance company or syndicate, excluding life and industrial assurance business, must, to the extent it reinsured its assurance business, reinsure with the company. The amendments to the 1936 Act proposed in this Bill do not repeal Part VI of the Act and I should like to know from the Minister whether it is intended, after this legislation is passed, to establish a reinsurance company. I should also like to know whether the Equitable Insurance Company reinsured its business or not and if it had done so would it have enabled it to avoid the situation which has arisen. All these question require to be answered so that the House and the country may have full information on the general position as well as the particular problem which has arisen due to the insolvency of the Equitable Insurance Company.

There is a small point in section 13 under which it is proposed to amend the 1938 Act and where it says: "...for the purposes of sub-paragraph (x) of paragraph 8 of the agreement set out in the Schedule to the Insurance (Amendment) Act, 1938, be deemed...to be and always to have been a citizen of Ireland and a qualified holding body corporate..." I find it hard to understand the purpose of that because the Constitution lays it down that only Irish citizens can be elected to the Dáil and the Minister for Finance must be a member of the Dáil. This proviso is unnecessary, unless there is some meaning which is not apparent from the phraseology.

Mr. Tully

While the Labour Party agree that some type of legislation was necessary in order to remedy the position which has arisen as a result of the failure of the Equitable Insurance Company and to ensure that something like this would not happen again, there are a number of points in the Bill about which I should like to ask the Minister for information. I may add that I have a personal as well as a Party view on this because I am one of those people who got their fingers burned with this company.

One of the things I cannot understand is that, despite the fact that the Minister has admitted in the House that for quite a considerable period this company was suspect, nevertheless right up to the time at which he took the necessary action to terminate its activities, the company were allowed to collect premiums and in fact did so from some of my friends up to within a week or so of the date on which they went, to put it bluntly, broke. Not alone that but when the Receiver was put in, he had the audacity to notify policyholders, including myself, that the company's cover for insurance terminated on the 31st July, even though he had been put in there early in May. All of us knew that if we wanted protection for our cars, we had to take out insurance with some other company from a date in May and if we were wise, as some of our people discovered, we should have had cover for 12 months previously because apparently that company were not in a position to pay anybody.

The Minister may say, as the Receiver did in an impudent letter to me, that the Receiver had the right to terminate the policy, that I had not the right to terminate the policy. I still think that when the Minister found that insurance company was unable to give cover, there was no cover, and no official Receiver or anybody else had the right to say he was continuing the policy in operation until 31st July, almost two months after the company had collapsed. It was one of the most extraordinary things I have come across in public life and I should like the Minister to give some information as to how this came about, that all of us who paid our premium regularly found we had to renew it and had to pay twice in one year.

There is another aspect of this about which perhaps the Minister knows a great deal and on which I should like him to comment. Could he say if premiums paid through brokers ever found their way for that year to the Equitable Insurance Company or is it a fact that brokers did not pay the year's premium to the insurance company, despite the fact that they required their clients to pay a second premium to another company? It is the general talk throughout the country that that is the position. Somebody appears to have collected on the double. I should be glad if the Minister would satisfy me on that point.

We hear the story about the amount of money which motor and fire insurance is losing. It is well known that one company, which has declared a loss of £4 million on motor and fire insurance and, therefore, claims that premiums must go up, did in fact re-invest the money which was paid to them in premiums—as they were entitled to do—and have made a profit of £12 million. We are not so naive as to believe that when the insurance companies get money, they put it in a box and lock it away until somebody has a crash and then they go to the box and pay some of it out. That seems to be the general idea that insurance companies put across to us. In fact they re-invest in safe investments, as they are entitled to do, and they make a lot of money out of it. For that reason, it is dishonest for them to try to put it across that they must balance the amount of money paid in in premiums with the amount of money which they pay out in claims. That should be taken into consideration when this matter is being dealt with.

I am rather disappointed that the Bill did not go a little further to remedy a number of other defects in Irish insurance at the present time. Incidentally, the Minister's opening statement that the principal purpose of this Bill, is to provide relief for the policyholders of the Equitable Insurance Company is not exactly correct. It is only those who were unfortunate enough to have an accident who are covered. The ordinary policyholder who did not have an accident will be still at a loss. Apparently, nothing can be done about that. I am appalled to find that the English companies have not agreed to pay their share. I suppose, being human, it is easy enough to understand they cannot see why they should have to pay because an insurance company in Ireland fails to meet its commitments, but if they are to be allowed to trade here, they should bear whatever share of loss would be attributed to the trade in this country. The Minister is quite correct if he lays down conditions that they should either pay their share or, if they do not do so, that they should be made do so.

One extraordinary thing is this: I understand that all companies doing motor insurance in this country are members of what is known as the tariff ring. In England that is not so; only half the companies in England are members of the tariff ring and those outside the ring are able to quote very much lower premiums. Perhaps the Minister would comment on that. If that is the case, I am sure something can be done to remedy the position.

Deputy Cosgrave referred to the Private Motorists Protection Association and their attempt to get a licence. I should hate to think that our Government deliberately decided to withhold a licence from an Irish company until such time as they could bring in legislation which would prevent them getting that licence. The Minister has, I believe, rightly increased the amount of deposit. He says that £15,000 in present money values is too small. I agree. Last week I saw that somebody had got an award of £65,000 and if that is so, £15,000, to quote the Minister for Transport and Power, would be small beer, but I think an assurance should be given by the Minister that provided the PMPA meet the requirements he has laid down, they will get a licence because it is common knowledge in the city that insurance company representatives are boasting that no matter what they do, the Association will not get that licence. I hold no brief for them but I should not like it to go out that they can be prevented from getting that licence and that nobody outside the ring, who might possibly pull down premiums, would be allowed to get a licence. It would be too bad if that were so.

The Government are putting up £30,000 and they say it is mainly to cover workmen's compensation claims. That amount for workmen's compensation for the Equitable Insurance Company seems to be an extraordinarily high sum for one year, but if the Minister says so, I take his word. The sooner the Minister or his colleague brings in legislation to deal with workmen's compensation, the better for all concerned.

With regard to the levy which is being placed on other insurance companies, can the Minister give any assurance that this will not automatically result in an increase in premiums, that it will not be collected from the motoring public? This is important because I personally believe that the insurance companies are making quite a handsome profit at present and that they should not be allowed to use this as an excuse to increase their premiums further. I should be grateful if the Minister would let us have his views on this when replying.

There is another paragraph here which is briefly referred to:

The opportunity is also being availed of to make some changes in the Insurance (Amendment) Act, 1938 in relation to the connection between the Minister for Finance and the Irish Life Assurance Company, Ltd.

What a Bill that has been introduced to deal with an insurance company that has gone broke has to do with the activities of an assurance company which is mainly controlled by the State is something I cannot understand. I do not know if the Minister is aware of it but he has done something which should not be done by any Irish Government: he has set tongues waging. The general view of the public who are involved in insurance is that the Irish Life Assurance Company must be going broke since they are specially mentioned in a Bill which deals with an insurance company which has already gone broke. The Minister has mentioned that there is no other company affected at present. Would be confirm for the benefit of the employees of the Irish Assurance Company that there is no danger whatever of this company being bankrupt in a few weeks' time?

Another aspect of that which I think is rather sinister is the matter of the right to sell or buy shares in this company. Is this an implementation of a suggestion made by the Minister for Finance nearly two years ago and which was apparently forgotten up to now, to make available shares to the public in Irish State concerns? Is there anything in that, or any reason why it should be included now? Would the Minister say why the Irish Life Assurance Company should be included in a Bill mainly dealing with the bankruptcy of the Equitable Insurance Company? I think it is not unfair to ask that.

A final question: were the Board of the Irish Life Assurance Company consulted before it was decided to put this into the Bill? What are their views on it? That is also a very interesting point if the Minister would be prepared to comment on it. Apart from that, we all agree some action should be taken to deal with companies that go broke so that the ordinary citizen who pays his way should not find himself in the position in which a number of them are. Some of them I know myself have had serious illnesses as a result of worry about claims against them which they feel they are unable to meet because of the failure of the Equitable Insurance Company. May I ask that in future in the case of any insurance company that does not appear to be able to float, the Minister will take the necessary steps in time and will not accept the statement that £80,000 was invested in a non-existent company and could be used as assets by a company trying to carry on and cod the people of this country?

Mr. Sweetman

The Minister is, of course, aware and some members of the House are aware, that I am connected with an insurance company and I want to make it quite clear that I am speaking as a Deputy and not as a person concerned for or on behalf of that company. May I begin by being rather pedantic and suggest to the Minister that as a barrister of standing, he should not suggest that a company could go bankrupt.

Mr. J. Lynch

I was using the term in ordinary parlance.

Mr. Sweetman

I said I was being pedantic. I am afraid from the information I have, which is not necessarily exhaustive, the statement the Minister made in relation to the attitude of the British companies is not the whole truth. My information is that the British companies indicated they were not prepared to take part in a scheme that was put forward because they regarded the scheme as one that would cloak fraud. They indicated, too, that once the fraudulent aspect was disposed of they would be perfectly prepared to consider the situation. It is a matter of current gossip, as Deputy Tully has pointed out, that one of the assets in the company's balance sheet was an entirely fictitious asset in value. I have no knowledge whether it was or not, but I am aware that the Tower Insurance Company shares were included in the Equitable portfolios as being in the region of approximately £80,000 in value. Rumour said that was an entirely fictitious value. I do not know whether it was or was not. Only the liquidator and, I presume, the Minister, through the liquidator, could know whether that was true or otherwise. If it were a fictitious value, then it does seem to me that the suggestion that there was fraud in the certificate given under the Act is undoubted and cannot be denied.

I do not understand the view the Minister has taken that there was no obligation on him to investigate the contents of the balance sheets returned to him. May I say that, if his view of the law under the 1936 Act is correct in that respect, then I am even more amazed that he has not included in this Bill a section giving him that power. Frankly, I think there was always the obligation on him under the 1936 Act not merely to receive the accounts but also to investigate the accounts and I am absolutely certain that that obligation was acknowledged as being part of the statutory duty imposed by the Act of 1936 and that, over the years, inquiries were made of certain companies because of that obligation.

I should be grateful if the Minister could assist me in relation to one phrase used by him in his opening speech. He said that creditors other than those arising under eligible policies will not have access to the fund. Does he mean that to cover, so to speak, a creditor for stationery supplies, for instance, or is it intended that "eligible policies" will restrict underwriting arrangements, or what exactly does it mean, because I have had considerable difficulty in interpreting the Bill itself?

Like Deputy Cosgrave, I do not understand the purpose of the section dealing with the Irish Life. May I say that I know, and the Minister will say it in a moment—I have not heard the rumour about that company that Deputy Tully has heard—quite categorically that there is not the faintest possible shadow of justification whatever for it? The Irish Life is an absolutely sound concern. Even if it were not, the shares are held by the Minister for Finance and there would be an absolute obligation on the State to stand over the company.

Mr. Tully

What if they sell them?

Mr. Sweetman

It is an obligation I believe any Minister for Finance would accept. After all, the whole purpose in establishing the Irish Life Assurance Company was to take into account the valuations that were made in 1936 of the then companies and to float them as a solvent concern.

Reference was also made to Part VI of the Act—the Part that was not put into operation—in relation to the establishment of the Insurance Corporation of Ireland. That was not put into operation at the time because the British companies agreed to concede to the Irish companies a proportion— from recollection, 14 per cent—of their business which would be held in an Irish pool. There was no suggestion at the time that arrangement was made that Part VI would not be put into operation, that such ceding would be only to Irish companies which were tariff companies and that non-tariff companies would not be included. It is not an Irish insurance organisation but a London organisation which decides whether a company is tariff or non-tariff. I think it is a matter of regret that the Irish insurance pool has been restricted by the decision of the London office to solely Irish tariff companies instead of Irish companies as was certainly the intention in 1936, or some time after that, when the pool was set up in exchange for the dormancy of Part VI of the Act.

As I said at the beginning, speaking as a Deputy and not for an insurance company, with a little knowledge, not necessarily complete, of certain matters we are discussing, I should like the Minister to give the House a flat statement—he must have got a report from the liquidator—as to whether this asset in the Equitable balance sheet at approximately £86,000, I think, has in fact been proved to be of any value. If the liquidator has concluded his investigations in that respect, I am sure that he has made a report to the Minister in regard to that. It seems to me the value of the asset is the kernel of the question as to whether there was or was not fraud in the presentation of the accounts. The scheme that was suggested was not a scheme for the setting up of a fund like this but a scheme for the continuation of the Equitable Insurance Company on another basis which would undoubtedly have had, whether it was intended or not, the effect that the value of that asset and the reason for its certification in the accounts would never have seen the light of day.

Mr. Coogan

I should like to be clear as to the full provisions of this Bill. Is it the intention to meet only claims where judgment has actually been given? That is the first question. What is the position in regard to a claimant who, because he was in process of trying to settle out of court, had not had his case finalised? It will be a great hardship if such cases are not covered. If they are not covered, then they should be embodied in the Bill so that justice may be done.

Mr. T. Lynch

It is a good thing for the Dáil to approve a Bill such as this. Our duty in this Dáil is to act as protectors of the people. That is the primary objective of this Bill. People were taken in by this insurance company and awards have already been made in court, in regard to workmen's compensation and other matters, and the unfortunate claimants have no way of getting the money. I would say that this has been an expensive lesson for us all. I would not accuse the Minister but I would accuse some of his colleagues for refusing to answer Parliamentary Questions. This is a justification of something about which I have been arguing in this House for years, that we are representatives of the people, the watchdogs, you might say, of the people and instead of being brushed aside when we are asking questions about State companies, or about companies with a large amount of public money in them, it is only right that Ministers who are responsible or who say they are responsible —some of them who say they are responsible will not give information to the House——

An Leas-Cheann Comhairle

At the moment we are dealing only with the Minister for Industry and Commerce.

Mr. T. Lynch

In all sincerity, I ask you, Sir, is it not a fact that the Minister has to come in and put up a large amount of public money, and ask other Irish insurance companies to put up large amounts, because an insurance company in which the Government had a stake, defaulted? I think what I am saying is very important. I am not accusing the Minister——

An Leas-Cheann Comhairle

The other Ministers are not responsible and may not be discussed on this Bill.

Mr. T. Lynch

That is a pity, but we will leave that end of it. The English insurance companies refused to come in on this and put up some money. I thought at first that that was a little bit high-handed but when they gave their reason it was a good one, that if in the future there was a "chancy" company, they could take a chance spending money on promotion and if it came off, well and good, but if it did not, the taxpayer would pay.

I should like to give credit to the insurance companies for the manner in which they came forward because it is hard lines to have to put down a deposit of £100,000 of what we call locked-up money to make sure that if in the future—and I do not think there will be, with the help of God —there were any defaulters, the Minister would have a fund to compensate the policyholders or people who had claims. I will say to the Minister, as I am allowed to speak only to the Minister, that he should continue his policy in this House and continue to answer Parliamentary Questions put down to him in regard to companies for which he is responsible. Many people might not like this but we as the representatives of the people are entitled to know, and the fact that we get answers showing that everything is open and above board is something which should strengthen the company if questions are asked about it and if anything is going wrong with a company, it is a good thing that it should be brought into the House. I welcome the Bill from the point of view that it is going to pay the claims that have been made and the awards given in court to unfortunate policyholders.

Mr. J. Lynch

I want to join with Deputy Sweetman at the outset in scotching the rumours Deputy Tully appears to have heard, and which I have not heard, about any question of solvency as far as the Irish Life Assurance Company is concerned.

Mr. Tully

Thank you very much.

Mr. J. Lynch

This is an insurance Bill and is one of a number of such Bills which come along at intervals only. Advantage was taken of the introduction of this Bill to include a provision regarding the connection between the Minister for Finance and the Irish Life Assurance Company for the purpose of clarification of a certain situation which I propose to explain to the House. There is no other significance whatever in the inclusion of these two sections, sections 12 and 13 which refer to the Irish Life Assurance Company.

Section 12 empowers the Minister for Finance to "acquire by subscription or purchase and sell any shares of the Irish Life Assurance Company Limited." The section, as I said, was introduced at the request of the Minister for Finance. Under the existing law, the Insurance (Amendment) Act, 1938, the Minister already has power to dispose of shares held by him in the Irish Life Assurance Company but has no power to purchase further shares. That not only explains the position but relieves the fears expressed by Deputy Tully that the Minister for Finance has the intention only of disposing of shares.

Mr. Sweetman

The operative word is "only".

Mr. J. Lynch

The other section to to which both Deputies Sweetman and Cosgrave referred is section 13 and they asked for clarification of it and the reason for its insertion here. As the Deputies are aware, section 14 of the 1938 Act provides that the memorandum and articles of association of the Irish Life Assurance Company must be so framed as to conform with the provisions contained in the Agreement scheduled to the Act. Paragraph 8 of the Agreement provides inter alia that the voting rights attached to the shares in the Irish Life:

shall be declared to be that each issued share shall entitle the holder thereof (being the beneficial owner thereof) and being either (a) the Terminating Company, or (b) a citizen of Ireland, or (c) a "qualified holding body corporate"

to vote in respect of that share. Some doubt has been cast on the qualification of the Minister for Finance as a shareholder of the company to qualify under these respective headings. The Minister himself has no doubt about it but since doubt was cast whether he would qualify, he asked me to include this provision to remove all doubt so that he can, as a beneficial owner or as a citizen, use his voting rights as a shareholder.

Mr. Sweetman

There are no proceedings pending?

Mr. J. Lynch

None whatever. I do not think I should comment further.

Mr. Cosgrave

I do not think it is of any significance, but it seems a lot of verbiage to supplement what is already in the constitution.

Mr. Sweetman

Is this part of a very long submission?

Mr. J. Lynch

No.

Mr. Sweetman

I was trying to ascertain the source without naming it across the floor of the House. I remember a very long submission I received.

Mr. J. Lynch

I do not think it has any connection with the long submission referred to by the Deputy.

Mr. Sweetman

The Minister knows the one I am referring to.

Mr. J. Lynch

To come to the generalities of the Bill, if I may call them that, the purposes for which it was introduced, Deputy Cosgrave referred in particular to auditing arrangements. I think Deputy Sweetman and Deputy Tully also to an extent felt that more might have been done with regard to ascertaining the exact position of the company as disclosed in its balance sheets and that more might be done in future to ensure that the true position of insurance companies as to their solvency is disclosed in the returns they are obliged by Statute to make to the Department of Industry and Commerce.

Insurance companies who carry on business under licence in this country are obliged under the 1936 Act to deposit annually with the Minister for Industry and Commerce returns comprising accounts, balance sheets, and statements in the form prescribed in the 1936 Act and in the preceding Act of 1909. These returns must be audited in accordance with the Companies Acts. The requirements as to auditing, with which the Equitable as well as other companies had to comply, were set out in sections 112 and 113 of the Companies (Consolidation) Act, 1908. That Act is now repealed but this obligation has been repeated and expanded in the 1963 Act.

Under these provisions a company was required to appoint at each annual general meeting an auditor or auditors to hold office until the next annual general meeting. The provisions precluded a director or officer of the company from being appointed as auditor and prescribed a requirement regarding the giving of notice relating to the appointment of auditor. The auditors were required to make a report to the shareholders on the accounts examined by them and on the balance sheet laid before the company in general meeting. The report had to state (a) whether or not the auditors had obtained all the information and explanations they had required, and (b) whether they were of opinion that the balance sheet was properly drawn up so as to exhibit a true and correct view of the state of the company's affairs to the best of their information and the explanations given to them, and as shown by the books of the company.

The requirements in the matter of auditor's certificates are even more elaborate since the coming into operation of the Companies Act, 1963, which, as the House is aware, came into operation on 1st April, 1964. Apart from the requirements to which I have referred, the 1936 Act prescribes a certificate which must accompany the balance sheet of an insurance company and which must be signed by the chairman, two directors, the principal officer of the company and the managing director, if there is one. These persons must certify that the assets shown in the balance sheet do not exceed in the aggregate their market value, after taking into account any investment reserve fund; certify that the mortgages and loans are adequately secured; where the values of the Stock Exchange securities shown in the balance sheet are higher than the public Stock Exchange quotations, explain how the values have been arrived at; state the amount of every increase of freehold or leasehold property which is not solely due to the cost of additions since the last balance sheet.

These are stringent obligations on both the auditors and directors and principal officers of the company. In so far as there is any suggestion of fraud in the returns made by the company, that is a matter with which the court, having seisin of the winding-up, will deal and may be regarded as sub judice. I do not feel I should comment further on that.

As far as the Department are concerned, the accounts of insurance companies are not required to be audited by the officers of the Department. There is no provision in the Act requiring officers of the Department to evaluate the assets of an insurance company as a matter of course.

Mr. Sweetman

What about the doubtful solvency section?

Mr. J. Lynch

But there has to be a doubt about solvency—that is the only case. The function of the Department is to see that the accounts are submitted in the prescribed form and that they are certified in the prescribed manner. Naturally, I did give some consideration to the question whether the present procedure should be altered to ensure a tightening up in the supervision of these accounts. As I said previously in this House, our whole system of commerce so far as accounts are concerned depends on auditors' certificates. The wheels of commerce are oiled to a considerable extent by these certificates, by the certified returns of auditors which are accepted in commerce in every walk of life, in the courts and as between companies. If auditors' certificates were not relied on, the whole fabric of our commercial structure would have to be altered.

In the case of insurance companies, one of the alternatives that has been suggested is that the returns of insurance companies might be examined by the Comptroller and Auditor General. I do not think this would be feasible, in view of the fact that some 60 foreign companies would be obliged to have their accounts submitted to the Comptroller and Auditor General and these would inevitably include assets and business that have no direct association with this country. Even if these accounts were confined to the business in this country of both Irish and British companies, I do not think the staff of the Comptroller and Auditor General's office would be of sufficient size to undertake this job.

There have been other suggestions as to having the accounts of the insurance companies examined by a special panel of auditors. Again, having regard to the diversity of choice the companies have and exercise in regard to auditors, it was found this would not be practicable. In any event, I have decided that, apart from the vigilance that must continue to be exercised in my Department, there is hardly any necessity for stricter obligations to be imposed. In the first place, we are in this Bill setting up a compensation fund to meet claims, and in the second place, we have a further assurance to the insured persons that their interests will be more properly looked after by providing that substantial deposits must be made in court.

In regard to the increase in the deposits required in the High Court and the effect of these increases on the Private Motorists Protection Association, I would like to point out that this company did apply for a licence and, after some discussion with my Department, were prepared to comply with the law as it then stood. At the time of their application. I knew that the introduction of such a Bill as this was imminent, and I felt it would be unfair to this new insurance company, which it undoubtedly is, to issue a licence under the existing law, realising then that there would only have to be a deposit of £15,000 and that when this law came into force, they would have to increase that to £100,000. I thought it better that their full obligation under the law as it will be when this Bill comes into operation should be made known to them before the licence was issued. If PMPA apply for a licence and conform with the full obligations of the law as it will be when this Bill passes, they will get the licence.

Deputy Cosgrave asked why cannot the insurance companies administer the fund themselves as the Incorporated Law Society does in the case of the fund for solicitors. In the first place, they declined to participate in the fund in this form, and even when told that it was being set up, they made no suggestion whatever that its administration should be entrusted to them. As the liquidator had been appointed by the court and as much work had been done by the court in relation to the winding-up of the company, I thought it better that the administration of the fund be retained in the court. I do not expect that it is likely in our lifetimes, or ever, that another insurance company will become insolvent in this way. I believe that this will be a once-and-for-all operation.

Mr. Sweetman

When the fund is created, it will be invested by the Accountant of the court. What will happen to the interest on that investment? Will there be any point at which it will arrive at a maximum and a surplus distributed between the contributing companies?

Mr. J. Lynch

I have given some thought to that possibility but at the moment I do not intend to do anything. Contributions will be arranged in consultation with the companies in relation to their premium incomes. As soon as a certain amount is lodged in the fund, it will be time enough to consider where we ought to call a halt and where the accretions to the fund will be sufficient. There will then be plenty of time to decide whether we will distribute any surplus over a certain amount.

With regard to Part VI of the 1936 Act for the promotion of a re-insurance group in Ireland which Deputy Cosgrave says was never implemented, Deputy Sweetman has, to a considerable extent, stated what the reasons were. The Irish insurance companies requested that it not be implemented by reason of the agreement to which they had come and to which Deputy Sweetman referred

Deputy Sweetman stated rather categorically, and I quote: "That the British insurance companies would not take part in any scheme that would cloak fraud". I saw the representatives of the British insurance companies some time back. The officers of my Department saw them subsequently, and they never used the word "fraud" in any of the conversations. I cannot remember in detail what they said to me at that time but the effect of it was that they would not contribute voluntarily because this could lead to a reduction in standards of management and efficiency in the industry. I believe it was in the same vein that they continued their subsequent discussions with the officers of my Department but I am assured that the word "fraud" was never used by the representatives of these companies.

There were some questions as to what type of claims would be met. I want to assure Deputy Coogan that claims arising out of judgments will not be the only claims met. Settlements will also be met but the liquidator will have to be satisfied that they are settlements properly and reasonably made. The ordinary creditors, such as stationers, will not be covered by the fund and neither will re-insurance debts.

Mr. Sweetman

Even excluding those, there is still a deficit of some hundreds of thousands.

Mr. J. Lynch

I cannot say that definitely. We have no definite information as to the extent of the obligations.

Deputy Tully has said that £30,000 seems a very high amount in regard to claims under the Workmen's Compensation Acts but these claims continue over a number of years. Accidents happen and the injured person is paid a weekly sum over a certain period. That payment may be ultimately compromised. The £30,000 will cover all these claims.

Mr. Tully

There is only one small company involved in it.

Mr. J. Lynch

The Deputy will appreciate that the obligations arise over a number of years.

Mr. Tully

I understand that.

Mr. Sweetman

Will it include a capitalisation for weekly payments, for example?

Mr. J. Lynch

It will. The Deputy will appreciate it is not easy to capitalise on a lot of small claims just now. Certain workmen will be in receipt of full compensation on the basis of total incapacity and these will either decrease to partial incapacity compensation or cease altogether, so that claims now worth £4 10s a week could not be capitalised on that basis.

Mr. Sweetman

The ordinary provisions for settlement by application to the circuit court will operate?

Mr. J. Lynch

That is correct. Deputy Tully complained about the action of the liquidator in writing to policyholders determining the point at which he had ceased to have responsibility for policies. As the Deputy is aware, the liquidation is being done under the aegis and authority of the High Court and any matters he refers to in connection with the liquidator are really matters for the High Court. They are matters on which I cannot reasonably comment. The action of the liquidator in writing to policyholders was prompted by a desire to explain the legal position as he saw it at the time and he was and is operating under the authority of the High Court.

Mr. Tully

He went to the trouble of writing a second letter to me stating that I had no right to terminate my policy, that he was determining it should be terminated from 1st July. However, I had no cover from 1st May, so that it was impertinence on his part.

Mr. J. Lynch

He was there as an officer of the court. It is for that reason also I am anxious to explain to Deputy Sweetman that I am not at liberty to ask him if in fact the company to which he refers as having been written into the assets of the Equitable Insurance Company as being worth £60,000 or £70,000 was in fact a genuine company. That, among other things, will presumably arise for consideration in the course of the winding up. The liquidator now is an officer of the court and not under my control.

Mr. Sweetman

Is it not a matter for the Attorney General as to whether action should be taken, whether he should bring the matter to the notice of the court?

Mr. J. Lynch

Only the court has authority.

Mr. Sweetman

I think the Minister has.

Mr. J. Lynch

I ask the court to appoint a liquidator.

Mr. Sweetman

But the Minister does not divest himself of his responsibility by so doing.

Mr. J. Lynch

We can all be reasonably satisfied that whatever is necessary to be done will properly be done by the High Court, which is perfectly competent.

Mr. Sweetman

If it is brought to the notice of the court, certainly.

Question put and agreed to.

Committee Stage ordered for Tuesday, 30th June, 1964.