Baineann an Bille seo le trí ábhair a thagann faoi réim reachtaíocht árachais — comhdhéanamh Chuideachta Árachais Saoil na hÉireann, Teoranta, ráthaíochtaí onnmhairithe a sholáthar agus ráthaíochtaí bainc a sholáthar i ndáil le h-iasacachtaí ón mBanc Eorpach Infheistíochta.
The purpose of this short Bill is to make three changes in insurance law which are of an urgent and highly desirable nature. Firstly, the Bill proposes an amendment to the Insurance (Amendment) Act, 1938, under which the Irish Life Assurance Company Limited were established, in order, mainly, to allow Irish Life to enter the non-life insurance market in Ireland through a subsidiary company. Secondly, the Bill proposes to amend further section 2 of the Insurance Act, 1953, so as to increase the aggregrate of the Minister's liability under export credit insurance policies from £100 million to £300 million. This change is necessary to keep the figure in line with the increasing value and volume of our exports.
The final amendment affects the Insurance (Amendment) Act, 1978, and is by way of confirmation that banks licensed in the State can guarantee loans issued by institutions such as the European Investment Bank for industrial development projects in this State. I will now deal briefly with each of these three aspects in turn.
Irish Life Assurance Company Limited were brought into being by the Insurance (Amendment) Act, 1938 which provided for the taking over of the business of several existing insurance companies which had run into financial difficulties. The 1938 Act enabled a rescue operation to be mounted to protect the interests of the policyholders, and the companies involved were amalgamated. The Minister for Finance contributed £1 million towards meeting the deficiencies in the funds of the participating companies. The 1938 Act provided that the business of these companies would be transferred to a specially constituted company referred to in the 1938 Act as the terminating company, which would, on a suitable occasion, transfer the business to a company known as the permanent company. The transfer to the permanent company was effected in 1947 and the permanent company is now known as Irish Life Assurance Company Limited.
I think it is fair to say that this rescue operation has come to be one of the most successful operations mounted by the State. Irish Life have gone from strength to strength since their inception and they are now our largest insurance company with assets in 1980 of over £700 million. These assets have provided valuable investment funds for the industrial and commercial sector of the economy and they are also an important source of Government funding via the gilts market. Senators will be aware that while the Minister for Finance owns some 90 per cent of the shares of Irish Life, the company are in practice run on a strictly commercial and independent basis. Freedom of action is essential in an area such as life assurance where the company are competing with other insurers who enjoy this freedom.
As might be expected, the liberalisation of insurance within the Community has the effect of increasing competition for insurers at home and providing new opportunities in other member states. The non-life market was opened up substantially by the implementation here in 1976 of the EEC Non-Life Directive and the life market will be similarly affected when the life directive comes into effect shortly. In face of this situation, Irish Life have sought to diversify their business and extend their activities, for example, into foreign markets.
For some time past the company have recognised the desirability of being able to engage in the non-life insurance market. Under Irish insurance law it is not possible for the same company to transact both life and non-life insurance. Indeed, this separation of life and non-life activities has been established as the norm in the First EEC Life Assurance Directive for companies seeking insurance authorisations in the Community in future. Nevertheless, it is possible, both under Irish law and the EEC directive, for a company who are authorised, for example, to transact life insurance, to engage in non-life insurance, and vice-versa, via a subsidiary company, and there are several examples of such companies already in the Irish market. However, Irish Life are specifically restricted under the 1938 Act, and their memorandum of association, to the carrying on of life assurance business only, and cannot even by way of subsidiary company engage in non-life business.
The basic purpose of the first section of the Bill is to remove this restriction and allow Irish Life to establish or acquire such a non-life subsidiary. The Bill will, therefore, do no more than place Irish Life on an equal footing with their main competitors in the Irish insurance market and provide them with a broader base from which they can better exploit such opportunities as may arise in the future and diversify into areas of underwriting activity from which hitherto they have been excluded.
Senators will be aware that the company have made a successful offer for a majority holding in the share capital of Church and General Insurance Company Ltd., a long established Irish non-life insurance company. This offer was, of course, conditional on the enactment of legislation enabling Irish Life to make the necessary changes in their memorandum and was also subject to a decision by me not to make an order under section 9 of the Mergers, Take-overs and Monopolies (Control) Act, 1978. A proposal, accordingly, has been made to me under the Mergers Act and, having examined it in accordance with the usual procedures in these cases, I have decided not to make such an order and to allow the take-over to proceed.
Irish Life in association with Church and General will, in future, be in a position to offer a complete insurance service to their customers and it is their intention to compete through their subsidiary in the market for all classes of non-life insurance, including fire, motor and other liability classes. Section 1 of the Bill is intended to facilitate the company in pursuing this course.
The Bill also provides in section 1 for two further slight amendments to the Insurance (Amendment) Act, 1938. The first will enable certain purely technical changes to be made in the memorandum of association of Irish Life, to bring the description of life assurance contained therein into line with the EEC Life Assurance Directive which will be implemented shortly in this country. The second will allow Irish Life to delete certain spent provisions from their memorandum. It is necessary to effect these minor changes by way of legislation for the same reason which applies in the case of the first amendment, that is that the 1938 Act lays down in specific terms the content of certain of the main provisions of the memorandum and articles of the company and the Act must, therefore, be amended to enable the changes to be made. These latter two amendments are of a technical nature and do not make any real change in the company's position.
Turning to export credit insurance, Senators will be aware that section 2 of the Insurance Act, 1953 enables the Minister for Trade, Commerce and Tourism to give guarantees with respect to the insurance of risks in connection with exports. Under the Act, the aggregate amount of the liability at any time for principal moneys in respect of export guarantees was set at £2 million. As our exports have grown over the years this figure has been successively amended, reaching the present limit of £100 million in the Insurance (Amendment) Act, 1978. At 31 December 1980 the actual aggregate amount of the liability under the scheme was £68.1 million but the expectation is that the £100 million limit will be exceeded in the very near future. Hence the opportunity is being taken in this Bill to increase the present limit to £300 million. Though the size of the increase is very large, it is tailored to keep pace with the expanding value of our exports and to obviate the need for further upward adjustment of the limit for three to four years.
I can assure the House that export credit insurance is of considerable value to our exporters enabling the various political and commercial risks involved in exporting to be shared and spread. The insurance policy also serves as a gilt-edged security to banks when the exporter wishes to raise working capital, as is amply demonstrated by the recently introduced export credit finance scheme for goods sold on short-term credit. That scheme is proving to be very attractive to exporters and in itself will encourage greater use of export credit insurance.
I hope that the House will agree that, given the importance of what is at stake, that is, the maintenance of a vital export support, the increase now proposed in the aggregate liability with regard to export guarantees can be accepted as both a necessary and timely step. I am confident that this proposal will have the support of the House.
The final provision in this Bill is by way of confirming that licensed banks in this country can guarantee loans made by institutions such as the European Investment Bank to industrial development projects in this country. The Insurance (Amendment) Act, 1978 allowed licensed banks to undertake certain types of guarantee and suretyship business specified in the Act which were previously regarded as insurance business. Certain doubts have arisen as to whether, within the exact and very specific terminology used in the 1978 Act, licensed banks are allowed to guarantee these loans from the EIB. In order to put this matter beyond any doubt it has been decided to amend the 1978 Act in the manner set out in section 3 of the Bill. The European Investment Bank requires guarantees from banks in the recipient country and confirming this facility in this Bill merely follows the intention enshrined in the 1978 Act to allow banks to give such guarantees.
I am sure Senators know that it has been the intention for some time to amend and update Irish insurance legislation in general. This exercise is well advanced and I would hope to introduce the necessary amending legislation fairly soon. For this reason, the present measure has been limited to the few specific items for which there is an immediate need and which could not await the finalisation of the major Bill now being processed.
I commend this Bill to the House and I am hopeful that Senators will be agreeable to enabling the Bill to be passed speedily.
Ta Súil agam go n-aontóidh gach Seanadóir leis an mBille seo agus go mheidh toradh fiúntach ar an gcíoradh a dhéanfaimid air.