I move: "That the Bill be now read a Second Time."
As Minister for Industry and Commerce, I have powers under the Insurance Acts, 1953 and 1969, to give guarantees with respect to the insurance of risks in connection with the export of goods and in relation to the rendering of design and planning services, the work on which is carried out in Ireland in connection with engineering or constructional works executed abroad.
The purpose of this Bill is to provide for an increase in the aggregate amount of the liabilities which may be assumed by me under the Insurance Acts, 1953 and 1969, for export guarantees covering the insurance of risks in connection with external trade. This increase is made necessary by the recent introduction of a new scheme of export credit insurance. It may be helpful to Deputies for me to say something about this.
Export credit insurance was introduced in this country in 1955, as a result of an arrangement made by the then Minister for Industry and Commerce with a group of Irish insurance companies. The companies provided insurance against commercial risks on their own account, that is, insurance against the insolvency or default of the buyer. They also issued policies on behalf of the Minister covering political risks, these risks being entirely borne by the State; these policies provided insurance against the danger that action by a foreign Government would prevent the goods from being delivered or paid for, as well as against such eventualities as the outbreak of war and so on.
This joint scheme worked very well for some years. It was reviewed several times and improved in some respects, and over the years gave exporters who needed it valuable protection.
In the 15 years since the present insurance scheme was drawn up, Irish exports have, as Deputies know, increased enormously, from £110 million to £468 million a year. Exports are now spread over a much wider range of goods, and are going to much more diverse markets. It became apparent in recent years that the scheme of insurance which suited conditions in 1955 no longer provides the facilities which Irish exporters need now, if they are to continue to expand their trade and develop into new markets, as they must. A working group was, therefore, set up by my predecessor to examine the situation and make recommendations as to the changes or improvements that might be needed. The working group consisted of representatives of exporters, insurers, Córas Tráchtála and Government Departments.
The group confirmed that the old scheme was no longer adequate to meet the present and future needs of Irish exporters. They pointed out that exporters are increasingly diversifying into new and more remote markets, where credit risks tend to be higher than in the well developed industrial countries and where reliable commercial information may be difficult to get. They will be dealing with new and therefore unknown buyers instead of with firms they may have been supplying for years. An increasing share of our exports consists of capital goods, often sold on extended credit terms. These and other factors increase the need for export credit insurance and, since Irish firms must compete with exporters in other countries, the group pointed out that they need the same kind of facilities and at prices which are broadly comparable with those paid by their competitors elsewhere.
In most countries of Western Europe, and indeed elsewhere too, export credit insurance facilities are provided by the State. The working group concluded that it would be impossible for a commercial insurer to provide facilities comparable to those provided by Governments or with Government backing in other countries. They recommended, therefore, that State support should be provided for a scheme covering both commercial and political risks, and that the insurance facilities provided and the premiums should be reasonably comparable with those of other countries. These recommendations were accepted and the new scheme came into effect on 1st February, 1971.
The new scheme of export credit insurance provides, in a single policy, cover for commercial and political risks. This export credit insurance cover is available for exports of goods of Irish origin, whether sold on short term or extended term payment arrangements, and is also available in respect of fees due for design and planning services carried out in Ireland in connection with engineering or constructional works executed outside Ireland. There have been several improvements in the terms and the premium rates are reasonably comparable with those charged in other countries.
The operation of the new scheme of export credit insurance has been entrusted by me to the Insurance Corporation of Ireland Ltd. which, for some time, had been the only company issuing policies covering commercial and political risks and which henceforth will act as my exclusive agent in the issue of export credit insurance policies.
The introduction of a new scheme will result in an immediate increase in the aggregate amount of the liabilities assumed by me under the Acts, since I will be taking on liability for insurance against commercial risks hitherto borne by the Insurance Corporation of Ireland.
It is expected also that the new and improved scheme will attract additional business as exporters realise the support they can get from credit insurance. Deputies will also be aware that, as announced by the Minister for Finance, a scheme of credit at preferential rates for exporters of capital goods is being prepared by the banks. The introduction of this scheme will lead to a considerably increased demand for credit insurance. Because of these factors, the present limit of £10 million on the aggregate liability I may assume will be too low, and I am seeking to have it raised to £30 million.
It will be appreciated that the aggregate potential liability could become an actual liability only if all the risks covered by all the insurance policies issued should materialise. This is, to say the least, an extremely remote possibility. It is, in fact my intention that, taking one year with another, the export credit insurance scheme should be operated without net loss to State funds.
I recommend acceptance of this Bill.