Seanad Éireann debate -
Wednesday, 26 Mar 1969

Vol. 66 No. 10

Insurance Bill, 1969 (Certified Money Bill): Second and Subsequent Stages.

Minister for Industry and Commerce (Mr. Colley)

Under the Insurance Act, 1953, I have powers to give guarantees with respect to the insurance of risks in connection with the export of goods. Under the Act, an arrangement with a group of Irish insurance companies has been in operation since 1955 whereby the companies are authorised to issue political risks insurance policies in respect of exports of Irish goods. These policies provide exporters with insurance cover against the risk of loss due to such causes as action by foreign Governments preventing the transfer of payment for goods to Ireland.

Under the arrangement, the insurance companies are re-insured fully against their liability under the political risks insurance policies. The insurance of the risks of insolvency or protracted default of the foreign buyer is normally left to commercial insurers. There has been only one case in which the powers provided by the Insurance Act, 1953 were used to cover commercial risks insurance.

The present Bill will provide me with powers to give guarantees in relation to design and planning services carried out in the State in connection with engineering or constructural works executed outside the State. I have had representations seeking an extension to such services carried out for principals outside the State of the insurance cover available for the export of goods and I consider that it is desirable that the encouragement at present being given to exporters of goods by way of insurance cover should be given to exporters of these services. I am advised, however, that my powers under the Insurance Act, 1953, do not extend to giving guarantees in connection with the rendering of services unconnected with external trade in goods or merchandise. This Bill will provide me with the necessary powers.

The Bill also will increase to £10 million the aggregate amount of the liability which the Minister may have at any time for export guarantee arrangements. The limit which was fixed originally at £2 million was increased by the Oireachtas to £5 million in 1961. This is just barely sufficient to meet the present level of demand for export guarantees under the arrangements in force. It is necessary to raise the statutory limit in order to provide for the growing demand for insurance cover for exports of goods arising from the increased volume of exports and also to provide for any liabilities that might be assumed under guarantees in relation to design and planning services. It will of course be appreciated that the aggregate potential liability for all the arrangements in force at any time would become an actual liability only if all the risks covered by the insurance policies materialised at the same time and for the maximum amounts. This is an extremely remote contingency.

The underlying purpose of the Bill is to facilitate the expansion of Irish exports by making possible the continuance on an increasing scale of insurance cover for exporters of goods and the provision of insurance cover in relation to design and planning services carried out in Ireland in connection with engineering or construction works executed outside the country. I am sure the Bill will commend itself to the House.

Professor Dooge

I think the House will agree with the Minister that both of the provisions in this short Bill are ones that will commend themselves to the House. With regard to the provision in section 2 extending insurance cover to the export of services, this is something which, I think, the House will have no hesitation in approving of, since it is part of a pattern of the extension of legislation to put the export of services on a par with the export of goods. We have in the House welcomed the various moves in this direction.

The move in the last Finance Act to allow for the remittal of tax in regard to the export of services, the Bill which was before us last week which allows grants to be made by Córas Tráchtála in regard to the export of services, and now this Bill which extends provisions in regard to insurance, are all part of a desirable pattern. There is no need for us to go into detail. The principle has been approved of by the House. It might be no harm to say again that the export of such services is, indeed, every bit as much a benefit to our economy generally, to the expansion of our economy and to our balance of payments, as the direct export of tangible goods.

I hope that the benefits given under the various enactments will be availed of to the full. I should like to ask the Minister whether steps are being taken by Córas Tráchtála or by his Department or by anyone else to bring to the notice of engineers, architects, planners, civil engineering contractors and builders the facilities now available. I do not know if this enactment is the end of the line but, if there are further measures to come, it might be as well to wait until the legislation is complete before something in the nature of an explanatory leaflet or pamphlet with regard to these provisions is circulated to those people. I am sure that the particular bodies who have been consulted in this matter will have heard of the success of their efforts but the Institute of Engineers and the Association of Consulting Engineers have not been directly concerned with this matter and it would be as well if an effort were made on behalf of the Government to make those who may benefit from this aware of the situation.

When we speak of the people who can benefit from this legislation we also speak of people who can benefit the country itself. In each of these Bills that comes along, while we have the same objective, we seeem to have some difference in wording. This Bill is so short that it might be as well to deal with this point now instead of doing so on the Committee Stage. We had in the Finance Act a reference to the engineering services.

In the Bill last week we had reference to the architectural services and it was distinctly laid down as including engineering services. In the Bill before us now the subsection is said to apply to the design and planning services. Can I take it that the cover is the same in all cases, that those who benefit under the Finance Act, those who benefit under the Export Promotion Act and those who benefit under this Insurance Bill are the same category of persons, or are the differing definitions in the three enactments before us related to slightly different groups? Is one group included under one piece of legislation and excluded under another? It is important that we should know what the position is and I would be glad if the Minister would clarify it when replying to the debate. We know that the professions can be jealous of one another and it may well be that engineers are placed first in one piece of legislation, architects in another and planners in another to give primacy to each in turn. If so, this is fair play but I would be concerned as regards the exact limits of definition involved. The principle is one with which we are all agreed.

I remember a few years ago I had occasion to visit an organisation known as Tahal, an organisation responsible for the planning of water resources in the State of Israel. In this particular organisation, which had been given a most onerous task, two-thirds of the work being done was being carried out outside the State of Israel. The organisation which was built up to supply an internal need was now a thriving export industry and was doing more work outside the country than inside it.

I should like to ask the Minister if it is only persons who are practising as private individuals or as partners who are covered by this Bill. What would be the position if the ESB were to make their expertise available to outside countries in the way of the export of services? This is an important point. Perhaps it is because I was at one time a member of the design team of the ESB that I have such a high regard for their capabilities. It was necessary at one time for us to import the knowledge of German engineers to plan the Shannon Scheme. That is no longer so. The engineers, civil, mechanical and electrical, who form the design teams are now so much masters of their jobs, so much masters of their professions, that we could well export their services. It might well be that the planning of the work of the ESB, which must have natural fluctuations, could be harmonised so as to allow for the carrying out of work overseas by these design teams.

It might be important to consider that question in regard to this and other legislation and to examine the position of statutory bodies apart from persons. It is particularly important in regard to this legislation. In regard to the question of industrial grants or remission from income tax it could hardly arise in the case of a statutory body such as the ESB but in regard to insurance cover it could be equally applicable to the ESB or to Bord na Móna which have a highly specialised knowledge. Insurance cover is a particularly important matter and I should be glad if the Minister when replying would indicate whether such bodies would be covered.

I take this opportunity to urge on the Minister and his colleagues that State bodies might be encouraged to consider the export of services in this particular way, always with the proviso that the work which they have to undertake at home should take first priority.

The second provision of this short Bill is in regard to the increase from £5 million to £10 million of the limit which was placed in the Insurance Act of 1961. This is again something of which the House will approve because it covers not only services, of which I have been talking, but also the question of exporting of goods, and this is desirable. The only regrets which Members of the House might have in regard to this is the limitation of this Bill to political risks arising outside the country. We might perhaps regret that the Minister and his colleagues are not as yet able to insure Members of the House against political risks which might arise within the country. How ever, I think we will be content to carry these risks ourselves, and I commend the Minister on the introduction of this Bill.

Mr. Colley

On this side of the House we feel that we have confidence in being able to cope with those risks.

Mr. Cole

Would the Minister have any figures to let us know whether many of these risks become actual liabilities? The other point I should like to raise is whether we should insure these companies or individuals directly. The Department I presume, according to this Bill, would deal with an insurance company, in other words, guarantee a company already insuring. Is it possible to consider that the Department itself would be the actual insurers, so that they might avoid a premium which might be fairly heavy in many instances? It might be a more reasonable attitude for the Department to say "We will guarantee you if there is any payment for any reason political or otherwise. You can come to us direct." I wonder is there a case for that, as I find that in a great many sections of Government and local government quite considerable sums are paid out annually towards insurance. I am sure that this is very gratifying to the insurance companies, but they could do this by being the direct insurers and perhaps avoiding considerable premiums year after year where the risk is comparatively small and the amount very large.

Professor Quinlan

We can all welcome this Bill now, and I can be very brief, simply to endorse everything that Senator Dooge has said on this. It follows along the lines of much of what was said last week in connection with the design and planning services in connection with encouragement of exports. It is good to see that the Government are taking the second step to get into this very lucrative business. It is highly lucrative in that the money earned is in most cases almost pure gain. There is no import content to go into the finished product, which goes out purely from Irish brains and a little bit of paper, and that provides the service we are selling. I think the Government would want to take another step now, and be more aggressive in getting after this work.

I did raise the point last week, and I think I can return to it on this Bill, of the necessity to do something more than merely leave it to existing organisations or existing personnel to carry out promotion in regard to this. We realise that existing personnel are already overtaxed in what they are doing and certainly were not recruited for this specialised work. It is a highly specialised task. I would like to see some really topnotch scientists that we have abroad, either engineers or scientists, recruited with this end in mind, because design is the operative word in this case, and therefore it needs an outstanding design engineer to be able to assess the openings and to sell the services that we have got.

In selling those services the standing of that person in his profession in the world at large and his contribution to research literature in the world is of paramount importance. I would suggest that we should not be penny wise and pound foolish in this, and that the Minister should see whether he can get a specialised team going, possibly within Córas Tráchtála, which might be the place to locate it at the moment; but it should be broadened very quickly from its inception by ensuring that you had a committee attached to it who were really competent and acknowledged in the fields under consideration. Then we could go forward with an aggressive sales approach.

I also pointed out last week, and Senator Dooge has stressed, that we have in our semi-State bodies like the ESB, Bord na Móna and others teams that can readily fit into this matter. I would suggest that they be given every encouragement to do this, and the Minister might look at any re-organisation that is necessary, as I pointed out the last day, in electronic services with this specifically in mind. We are on to something good, something big, but it must be tackled with imagination, initiative and perseverence. Then we can go a long way.

Insurance cover is very necessary in this type of work because fees lag very considerably behind in design commission and it is quite possible that in dealing with countries where the Governments might not be over-stable we have to take a chance in selling our services and we might find with a lag of a year or two years that something might have happened in the country meantime making it very difficult to recover most of the fees. Consequently insurance cover is vital there.

I commend the Bill and would offer to the Minister any help we can give on the university side to further its objectives. In a very small way some of us have research experience with outside groups and we could perhaps be of some assistance to the Minister in forward planning.

Mr. Rooney

This is mainly an indemnifying Bill. It indemnifies the exporters of goods against losses from political risks. The ordinary insurance companies at a remarkably low premium provide the original cover for goods exported from this country, and in fact they provide cover even within this country as well in respect of Irish manufactured goods, and the main points to cover are first of all the insolvency of the purchasers and secondly protracted default beyond a 90 day limit. The Minister is increasing the indemnity from £5 million to £10 million. This is in keeping with the increased volume of exports from this country. In addition to increasing the indemnity he has also increased the scope of insurance proper by this Bill.

Originally, the 1953 Act referred only to Irish-manufactured goods but now this indemnity is being extended to provide indemnity to people engaged in designs and planning services for export—our technical work which is exported in the form of plans or designs which are availed of by contractors outside the country. This class of insurance is mainly the subject of what is described as a "credit insurance policy" and it is desirable that the insurance companies should continue, as they are now doing, to be the operators of this cover, first of all, because they are the watchdogs in the business —they are able to see the goods from origin to the eventual place of arrival and they are able to see that the conditions of the policy are adhered to.

If the Department of Industry and Commerce were to operate a new scheme as has been suggested, it might be difficult for the Department to act as watchdogs in connection with the various exports that will leave this country apart from the design and planning services to which it is intended that this Bill should also apply.

Contract guarantee bonds are also the type of insurance cover provided by commercial firms and, as the Minister has indicated, the purpose of this Bill is to apply to political risks, for instance, the stopping of payments by some Governments for goods exported from this country or for designs and planning services that might be exported in the form of drawings and so on in connection with major schemes outside the country.

I understand, and it is interesting to note, that behind the Iron Curtain the risks in connection with this matter in so far as insurance companies are concerned were mainly associated with the Governments of those countries, but in recent times major importers in those countries are coming into the business of commercial activity with this country. In my opinion, that is a very welcome development. It is good to see private enterprise is being given a chance in countries which previously had only a voice through their Governments in so far as trade with this country is concerned.

It is clear from this Bill that the Department greatly under-rate the political risks outside this country which might involve Irish exporters in losses as a result of non-payment for the goods or services exported. The Department are not involved in the actual provision of cover to ensure the payment of ordinary commercial losses by the exporters here and the importers outside. This is done by the ordinary insurance companies by the issue of suitable credit insurance policies or, in suitable cases, contract guarantee bonds, depending on the type of goods or services that might be exported. The premiums are very small in relation to the large amount of cover given in terms of money and, as the Minister himself has said, it is only during the last 16 years, since 1953 when this Act was first brought into operation, that it was necessary for the Government to provide this political indemnity that the Minister has mentioned in the course of his speech.

I do not suppose that the Minister considers it desirable to give us information in relation to that case—information which would make the case more widely understood and which would let us know exactly where the Government came in and the circumstances under which the Government were called on to provide this indemnity. If the Minister were in a position to review the facts of that case within limits, it would give us an idea of the real purpose of this Bill.

Mr. Colley

Senator Dooge is correct in referring to the provision in this Bill in relation to design and planning services as part of a pattern. As he said, these provisions are tied in with the Finance Act and the Export Promotions Bill which was before the House last week. This Bill is, in fact, the last of the legislative steps in that connection and consequently the question of bringing the services to the notice of people concerned does arise, as the Senator has said.

I imagine that the insurance companies concerned will be taking steps to bring these services to the notice of those concerned, but certainly Córas Tráchtála will do so. In relation to the other services which Córas Tráchtála provide, they have been effective in bringing its services to the notice of those interested. I have no reason to believe that the same will not be true in regard to these new provisions.

Senator Dooge also raised the question of the difference in the wording in the three Bills. There is a good reason for this but I want to assure him that the intention is to cover exactly the same categories. The reason for the difference in the wording between this Bill and the Export Promotions Bill is that in the case of the latter the services provided by Córas Tráchtála are provided for people who go abroad, whereas here we are providing the service within the State itself. This leads to the slight difference in wording but what is intended is that it covers exactly the same category. Again, there is a slight difference in the case of the Finance Act but the intention here, also, is to cover the same category subject to the fact that the export tax relief applies only to bodies corporate and not to individuals.

Senators Dooge also raised the question as to whether such bodies as the ESB would be included. I can assure him that they would be so included and I refer him to section 2 (1) of the original 1953 Act which refers to persons carrying out a business or profession in the State. Under that Act cover has been given to bodies corporate, including State bodies, so that there is no reason to believe the present Bill would not also cover such bodies.

I might say that I personally would welcome, as the Senator did, the development of the activities of these State bodies in such a way as to provide design and planning services abroad. I have no doubt that we have within a lot of these bodies the people to do the job and I think it would be of considerable benefit to the economy in general and, indeed, to the prestige of this country, if this were to be done, subject of course, as the Senator indicated, to their doing the job in so far as they were set up in this country and not taking on work abroad at the expense of their duties within the State.

Senator Cole raised a query about the figures for liability which we had met in the past. The position is we have paid out about £75,000 in claims, most of which will be recovered in due course. It relates to cases where a foreign Government has held up the transfer of money for balance of payments reasons. The money will in due course be released so we will recover most of this £75,000. The premiums which we received in respect of the same period amounted to about £90,000. The arrangement at present is commercial insurance companies operate this scheme. They do all the necessary work that would normally be done by an insurance company. They get re-insurance in full from the Minister for Industry and Commerce who receives the premium from them and they are paid a sum of 5 per cent of the premium in respect of their work. It is not contemplated at present at any rate that this work would be taken over by the Department or any subsidiary of the Department. It is conceivable that it could happen in the future. In fact it is done that way in Britain but we do not contemplate doing it at this moment.

With regard to the point raised by Senator Quinlan I do not think I can add very much to what I said last week. Indeed I think he will agree his remarks were more properly related to the Bill we had here last week because this Bill relates only to the provision of insurance cover not to the promotion of the service, which is a matter for the Export Promotion Bill.

With regard to the point raised by Senator Rooney, I am not quite sure if I heard him right. I thought he said I had indicated in introducing this Bill that there had been one case in which the Government had given political indemnity. I may have misunderstood him but if that is what he said he must have misunderstood what I said which was that there had been only one case in which the powers provided by the Insurance Act, 1953, were used to cover commercial risks insurance as distinct from political risks.

In that case, there was a question of long-term cover required for particular exports to the USA, if I recollect correctly. The commercial insurance companies would not take it on the basis of the long-term cover and it was decided after due consideration that in order to keep this export going—it was a valuable line of exports of capital goods manufactured in the State—we should as an exceptional measure provide the cover under this Bill. The policy at present is to provide only political risks cover under those Acts.

Question put and agreed to.

Agreed to take remaining Stages today.

Bill put through Committee, reported without recommendation, received for final consideration and passed.