I move amendment No. 1:
In page 3, subsection (6), lines 12 and 13, to delete "sum paid under section 5" and to substitute "sums paid under sections 5 or 6."
This amendment is simply to rectify an omission by the draftsman.
Committee on Finance. - Insurance Bill, 1964—Committee and Final Stages.
Section 1 agreed to.
SECTION 2
Amendment agreed to.
Question proposed: "That section 2, as amended, stand part of the Bill".
What form of insurance is envisaged in subsection (5)?
I understand it is very unlikely the accountant would require to insure the fund in any way. This follows the pattern of the Solicitors Bill.
Purely precedent?
Yes.
The section refers to the obligation of the accountant to keep books and so on and in paragraph (b) of subsection (8) it says:
The Minister shall cause each abstract and report furnished to him under this subsection to be published.
Would it not be wiser to invite some form of publication?
There is the famous phrase "as soon as may be".
It is desirable there should be public knowledge of what the state of the fund is from time to time. It will be decided that the best method of doing this would be with the annual accounts which the Minister for Industry and Commerce is required to make available—the annual accounts of the insurance companies.
Is it intended to have the £1 million contributed at this stage?
No.
How much will be in the fund at the beginning?
It is no harm I should mention at this stage that as soon as the liabilities of the present case are met or are about to be met, the fund will hardly be allowed to accumulate again. The sum of £30,000 will be contributed capital, non-repayable, by the Minister for Finance. The Minister will make available a loan and the accountant of the Courts of Justice may raise funds for the balance, to be repaid out of the fund which will be provided by the insurance companies. The period for payments into the fund will be a considerable number of years, perhaps.
Coming towards the last year, if a certain amount is outstanding for repayment of principal and interest to the Minister for Finance, the levy in that year will be fixed to about equate to the sum outstanding. It is likely that from there on the levy will not be requested so that there will be no question of allowing a huge sum to accumulate. The purpose of mentioning the £1 million was to meet any case that might arise in the future.
First of all, if the maximum sum of £1 million is to be raised by easy stages in the form of an annual levy, when we reach the stage at which the £1 million has been raised and is in the kitty, will that fund be capable of earing interest?
I have told the Deputy it is not the intention to go beyond the requirements of the present case. The £1 million is purely a notional amount to meet possible future cases.
The fund will get demands on it from the present Equitable Insurance Company case, running over a period of years. It will not be a question of waiting for the Equitable liquidation and then saying that £x will be put in. I assume it will be dealt with by drawings on the fund from time to time as the liquidator and the court decide. The amount will be borrowed from the Minister for Finance and that amount can be repaid.
Is it proposed to get the amount repaid in the one year or is it proposed to collect the amount over a period of years, or has the Minister yet come to a decision on that? My understanding of the borrowing provisions in this fund is that when the liquidator certifies £x are required to be drawn from the fund, with the consent of the President of the High Court that would be borrowed by the accountant on the fund and paid over forthwith and the levy will be brought in by repayment of the amount borrowed, or does the Minister propose to build the fund up at once in anticipation of what will come? It could be done either way.
It could be done either way. Our intention is to have a consultation with the insurance companies to ascertain what method of payment of the levy they would prefer. I would be prepared to recommend to the Minister for Finance that the period of levy would extend over a considerable number of years so that the impact on the insurance companies in any one year would not be very great.
I do not know if I explained the position satisfactorily when replying to Deputy Rooney. I shall take an example, as near as I can get. Assume that £200,000 is needed. As Deputy Sweetman said, the method of payment into the fund by the Minister for Finance will probably be, as the Deputy suggested, according as the court and the liquidator decide during the period. Assuming that £200,000 was the total amount required, then we could have a period of, say, ten years during which the levy could be paid and assessed according to the premium income of the respective insurance companies, and, say, in the 10th year or 15th year, as the case may be, there would remain to be repaid to the Minister for Finance, say, a sum of £20,000. My intention at this stage is that the levy in that final year, be it the 10th, 15th or 20th year, would roughly equate or almost exactly equate, the £20,000 necessary to pay off the Minister for Finance in respect of the Equitable fund and there would be no question of another fund accruing in the meantime. There would not be any other obligation on the insurance companies, unless another liquidation under the court—which God forbid— occurred.
Which God forbid, and which the proper exercise by the Minister of his powers under section 46 will prevent.
Will the Minister say whether the establishment of this fund will render the motor insurance fund quite unnecessary?
That will continue to be necessary.
Question put and agreed to.
SECTION 3.
I move amendment No. 2:
In page 4, subsection (3), line 13, after "policy" to insert "by reason of a judgment obtained against the person or".
Subsection (3) indicates that a sum due to an insured person in certain circumstances will be of such amount as the judge of the High Court, having seisin of the proceedings for the winding up of the insurer by which the policy was issued, may consider reasonable. That refers to Workmen's Compensation Acts cases. It was felt, although, perhaps, not rightly felt, that judgment could have been obtained against insured persons of excessive amounts, amounts that would be far in excess of what the claim was worth; in other words, if an insured person who would normally defend an action against him decided, because this fund was being created, not to defend or to be dilatory or in any way careless about his defence of the action, to such an extent that the court might award an unduly high amount of damages.
This does not refer to damages. It says "in respect of compensation payable".
Compensation. Yes, it will apply to common law also. The intention is that the judge having seisin of the proceedings will have power to ensure that an undue amount of compensation by way of damages or statutory entitlement under the Workmen's Compensation Acts is not paid to a particular claimant or plaintiff.
Surely, that would be there anyway?
We believe it would.
The insured under the policy has an obligation to minimise the loss and if he did not minimise the loss, the liquidator would be entitled to repudiate, just as much as the company itself, if he by his negligence contributed to the maximisation of the loss. That does not seem to me to follow from this at all.
I am a bit at sea. Assuming the Minister's amendment is passed, subsection 3 will read, if I am applying it correctly:
Where a sum is due to a person under a policy by reason of a judgment obtained against the person in respect of compensation payable by way of a weekly payment——
The Deputy has left out the word "or."
"Or."
I follow. That was my trouble. "by reason of a judgment obtained against the person or in respect of compensation..." I follow. Well, now, may I say in relation to the section itself——
Will we dispose of the amendment first?
I just want to say in reply to Deputy Sweetman that what Deputy Sweetman has said is our official view also but the amendment was put in at the request of the liquidator in order to make assurance doubly sure on his part.
I see.
Amendment agreed to.
Question proposed: "That section 3, as amended, stand part of the Bill."
The main part of section 3 is subsection (1) and I assume that the object of subsection (1) is to cover the case of a claim being made against a policy holder of, say, the Equitable Insurance Company and to indemnify a policy holder fully in respect of the claim. If the object or spirit of subsection (1) is carried out the money should go from the fund to the policy holder and should be applied by him to satisfy the claim made against him which was covered by the policy. Am I right in saying that that is the object of subsection (1), roughly?
I am not certain that the sum goes to the policy holder or to the aggrieved party.
That is my trouble. Under this it appears to go to the policy holder. I read the subsection:
Subject to the provision of this section, there may be paid out of the Fund to the liquidator of an insolvent insurer ... such amounts as may be necessary to pay any sum ... which is due to a person under a policy issued by the insurer in the State ...
The only sum that could be issued to a person under a policy would be the sum due to a policy holder by the indemnifying insurance company. The person claiming against him would not have any privity with the insurance company and would be a third party. So that, "a person" in the phrase "which is due to a person under a policy issued by the insurer" must mean the policy holder. It goes on to say:
and is in respect of a contingency the insurance of which is required by the Act of 1936 to be effected by an insurer ...
And it says:
together with the costs or expenses (if any) necessarily and reasonably incurred by the person in endeavouring to secure payment of the sum ...
and then on receipt of the sum the liquidator shall pay it out. If this money is to be paid by the liquidator to a person under a policy and if I am right that it goes to the policy holder, first of all, what safeguard is there in this section that it will, in fact, be applied in discharge of the claim brought against the policy holder? I know there is the ordinary safeguard that any person has against having himself made bankrupt or in debt but there can be circumstances in which the policy holder might get a payment out of the fund which is earmarked to discharge a particular claim brought against him and may, in fact, cash the cheque and disappear.
Secondly, if the money is to be paid to the policy holder, what is meant by the last two sentences at the end of page 3:
together with the costs or expenses (if any) necessarily and reasonably incurred by the person ...
that is, the policy holder——
in endeavouring to secure payment of the sum.
The only cost the policy holder could have incurred in endeavouring to secure payment of the sum would be in relation to the proof of that debt in the liquidation. What appears to me as probably intended to be covered is the costs and expenses of the claimant against the policy holder. If that is so, the section would obviously require some redrafting. I cannot see how the policy holder could be involved in costs or expenses in endeavouring to secure payment of "the sum", which is the indemnifying sum. I do not know whether I am applying the wrong view to the section but subsection (1) baffles me. If I correctly interpret it as providing that from the fund shall go to the policy holder a sum to discharge his claim on the company in liquidation under the policy, there is no safeguard provided for the discharge of a claim against the policy holder and the provision in relation to costs and expenses appears not to make sense.
The insurance company gives the policy holder a policy indemnifying him against any loss, liability or contingency. It is the policy holder that is covered. Supposing a motor claim results in a settlement for £3,000. Before that £3,000 can be paid to the person who secured the award the policy holder has to sign his consent. He must consent to the payment of £3,000 to the person who was awarded that compensation. The fact that the policy holder must consent to the payment shows he is regarded as the person who is covered, and that consent permits payment direct to the person to whom compensation is payable.
I do not understand at all how it is proposed to work this section in general and I should like a little clarification on it. Supposing Mr. Browne goes into court and gets a judgement against Mr. Smith, who was insured, for £10,000, will there then be a direction by the judge, assuming it is a High Court case, that the liquidator of the Equitable Insurance Company get from the insurance fund that £10,000 as an isolated case? Or will the position be that from time to time the liquidator will say: "I must pay out now to Mr. Smith £10,000 which has been adjudged against him and, therefore, I want to draw on the fund to the extent of £10,000"? Or will the liquidator wait until he is able to go to the court in the liquidation and say: "It is obvious there will be a £100,000 deficit. Give me £100,000 for the fund?" If it is to be the second general case, it seems to me it is all wrong. When Mr. Browne gets against Mr. Smith a decree for £10,000, he is entitled to leave that with the sheriff so that the sheriff can seize Mr. Brown's goods and put them up for sale.
Surely if we are providing this fund at all, there must be a method by which we can prevent the insured having an additional loss thrown upon himself and perhaps thrown upon the fund by the moneys being made available at the very earliest possible time they can be. I should have thought that the cheapest way of dealing with this would be that a general declaration would have been made by the judge in the liquidation. That is what the Bill should have provided if it was to be done in this way at all, a general declaration by the judge that there is a deficit in the Equitable Insurance Company's accounts and that, accordingly, when a judgement is given by the court against somebody who shows he has a valid policy, there and then in that action the appropriate certificate issues. Otherwise there will be quite unnecessary duplication of applications to the court in the liquidation under subsection (1). Perhaps I have misunderstood the matter, but if the Minister will explain what practice he visualises, it may help us to understand it better.
In reply, first of all, to Deputy O'Higgins, the costs and expenses referred to here are the costs and expenses of the person who seeks to be reimbursed from the fund.
That is what I thought but it does not bear that meaning.
I understand it does. It was felt in the Department that the reference to costs and expenses was unnecessary but the draftsman insisted that it go in. The sum due, in any event, would be inclusive of costs and expenses incurred in actions already decided. These are not the costs and expenses referred to here.
Deputy Sweetman raised the point— and to an extent Deputy O'Higgins raised it too—of the difficulty of a person having been decreed and not having the money available, that there might be a danger that the plaintiff or the applicant might not get his money at all or that he might be in too much of a hurry and have the goods of the defendant seized. In the first place, the fund will find itself in the same position as the insurer's company and when a person is decreed the obligation of the insurance company is to indemnify that person against whatever costs and damages have been levied against him. As in the case instanced by Deputy Sweetman, if Mr. Smith has a decree given against him, Mr. Smith will then claim against the liquidator and prove his claim with the liquidator. I expect that in cases where there might be some difficulty about the plaintiff being in too much of a hurry, the liquidator would be able to act and would be able to provide the amount of the costs decreed for the plaintiff in the case. In any event, I doubt if, in the circumstances, the plaintiff would be in a hurry to have the judgment, mortgage or whatever it is registered against the defendant and so put the defendant's property in jeopardy as long as he has the knowledge the fund is there. Of course, as Deputy O'Higgins is aware, there is the method of garnishee in case anybody wanted to hold on to the money out of this fund. In any event the liquidator will be able to act under the authority of the court.
That is exactly what I meant. Does the Minister visualise that the liquidator will have to go to the court for directions in every case to pay a judgement when he is going to get the money out of the fund? If so, the cost of doing it this way will be quite fantastic.
I think he can do it either way. Once the claim is proved, he can pay it or ask the court for authority to pay it. However, that is going into some detail.
What I am worried about is that there will have to be a specific application for every case. It would be endless.
I can see the difficulty Deputy Sweetman raises and I want to say a word about it but I also want to get back to what I said originally. It appears to me this subsection requires redrafting and I suggest that to the Minister. If the object of the section is as he said, imagine the position in relation to a person who is a policy holder of the Equitable, against whom a claim has been brought. That person, first of all, must be indemnified fully against the judgement debt, plus the costs of the persons who sued him, the plaintiffs. That person should also be indemnified against any legal costs and expenses that he has been put to in investigating or resisting the claim brought against him. That would appear to be the minimum that a policy holder is entitled to expect from a measure of this kind and I understand it is the aim of the Minister to provide that protection.
The trouble I see in this section is that this is not done. The section says in its operative parts that out of the fund there shall be paid to the liquidator such amount as shall be necessary to pay any sum which is due to a person under a policy. That sum would be the amount of the judgment debt and the legal costs and expenses of the plaintiff. It is clear there that, so far, what must be paid out to the person under the policy is the amount of the claim recovered against him and the costs and expenses of the plaintiff in recovering that sum. Then it goes on:
... together with the costs or expenses ... necessarily and reasonably incurred by the person ...
that is, the policy holder
... in endeavouring...
In the case I have mentioned the section should say: "in endeavouring to resist the claim" or words to that effect but the provision is:
... together with the costs and expenses ... necessarily and reasonably incurred by the person ...
that is, the policy holder
... in endeavouring to secure payment of the sum ...
The policy holder was not endeavouring to secure payment of the sum but to resist the claim.
Surely "to secure payment of the sum" is going into court and asking the liquidator to pay out money?
A person who has fought the claim, since the Equitable has gone "bust", is left there like Deputy Desmond in a situation in which he had to go into court and fight the claim which ordinarily should have been covered and resisted by the Equitable and his costs and expenses in fairness should be claimed upon the fund. I gather it is the Minister's intention that it should be paid but under the section, as drafted, I do not think it can be paid because only the costs and expenses of the policy holder "reasonably incurred in endeavouring" means his costs of going to a liquidator and saying: "Discharge it". For that reason, I suggest that the section be looked at again from the point of view of redrafting if what the Minister has in mind—as I can well understand—is proper protection.
There is some mention of this in the section and I think it is very clear that it is the sum due to a person under a policy issued. That sum must take account of a decree, plus costs of plaintiff, plus the defence's cost of either investigating a claim admitted or in resisting a decree.
No, because under the policy there is provision that the company will cover only legal costs and expenses incurred with their express consent in writing. These words are in every insurance policy. It follows, by reason of the emergency created by this liquidation, that the costs and expenses of resisting the claim have not been incurred by the consent in writing of the company.
The liquidator up to this has said: "I cannot help you; you will have to go in and forage for yourself."
I think you can claim yourself.
I know the situation in respect of policies. All policies have the provision in them that the company will not reimburse for costs incurred without their express authority. As I understand the position, the liquidator has been, understandably— I am not criticising him—taking the line since the liquidation: "I cannot tell you anything about it; you will have to stand on your own resources and come along afterwards and see what you can do about it." If that is so, under the terms of the policy the insured has no right against the liquidator.
As an act of grace, an insurance company would normally pay those costs but we cannot consider acts of grace here. We must consider express rights and the only express right the person has against the liquidator is in respect of (a) damages given against him, (b) plaintiff's costs given against him and (c) his own costs if under the policy he had got express instructions to resist the claim from the insurance company. If that provision were not in the policy, you could have people resisting claims, not telling an insurance company at all and enormous bills incurred. It seems to me that on the phraseology of section 1 Deputy O'Higgins's argument is quite incontestable.
I also want to come back to the other problem. This fund is to be administered by the Accountant under the control of the President. I think that was the phraseology used in relation to any funds held in court. The Minister might be better, in his private capacity, in so deciding than I should be. He might have a better knowledge of the sections, but I think it is the same as the ordinary provision. If I am right in that, it means that the Accountant will only pay sums out of this fund on the specific order of the court and I think the intention is that the Accountant would only pay sums out of the fund to the liquidator on the order of the court. I think that is what the Minister intends and I can understand that.
When, however, you come to read that practice in conjunction with section 3, subsection (1), leaving aside the point raised by Deputy O'Higgins, "which is due to a person under a policy issued by the insurer", then it seems to me you must have two things: you must have the application to the court for payment out of the fund and you must have it in respect of each individual claim unless you can perhaps bulk three or four claims that happen to come in in the same week or two. Will that not mean a very much greater and an unnecessary expense on the fund? Surely the fund could be operated on a much more satisfactory basis? The liquidator has either got to do the job or not. Liquidation is, in my opinion, the wrong way entirely of doing the job, but that is neither here nor there.
Surely the proper way to do it would be to operate the fund on a float basis. Then the liquidator could go to the court and say the company was insolvent and he must have funds to meet claims as they came in. He could ask the court for £50,000 out of the fund to meet the claims that would come to him between now and next October, say, when he could come back to the court, account for what he had done, and ask for more. Would not that be much easier, much cheaper, much more satisfactory?
It probably would, but the Deputy must remember that this is a liquidation under order of the court. We could, perhaps, go a bit of the way in easement of the procedure in that the liquidator may come to the judge and say: "I have 15 or 20 cases in which judgement has been given. The costs have been assessed and I want an order for the payment out of £x to cover the 15 or 20 cases". There is no reason why a judge could not give an order in respect of specific cases, McGowan against Smith, Murphy against O'Brien, O'Sullivan against O'Donovan, and so on. There would not be necessity at all times to go before the court in respect of each individual case for which payment would be required by the liquidator.
There would have to be an individual direction in each case.
An individual direction, but it could be made in respect of several cases at the one time.
But there is no power in the Bill.
The Minister is wrong when he says this is an ordinary liquidation.
It is a court liquidation.
It is not an ordinary court liquidation. The liquidation is there and the court agrees, but we are providing that the dividend in the liquidation will be met, which is an entirely different situation, and it is not an ordinary court liquidation. If it were an ordinary court liquidation the point is that the court must ensure that no one creditor is paid before the others because, if he were, he might be paid a greater dividend in the £ than his colleagues. In this case there is no such dividend problem at all. This is 100 per cent payment so long as it is a case coming within the purview of subsection (1) and, if it is a case that comes within the purview, there will be 100 per cent payment.
There cannot be any question of preferential payment and the only effect of doing it this way will be to make the costs very much heavier. I can see certain people being surprised that a solicitor should object to that, but I do object to it because it will bring the law into disrepute whereas it is not the law but the schema of the Bill and its drafting into the section which should be brought into disrepute because this is not being done in the cheapest way possible. Indeed, I am amazed that the Minister does not try to have it done cheaply. I shall try to draft an amendment. Whether or not I will be able to is another matter. I have not got the resources the Minister has at his disposal.
Question put and agreed to.
SECTION 4.
Question proposed: "That section 4 stand part of the Bill."
Suppose the sum of £30,000 proves totally insufficient to meet workmen's compensation claims, when the washing is all finished, does the Minister propose to adjust it?
No. It is not specifically stated——
I know that.
——to meet workmen's compensation liabilities, but it is expected that it will about equate with the workmen's compensation liabilities. If, however, it does not, it is not intended to change it.
It is a fixed sum.
Yes.
More or less does not matter.
No.
Question put and agreed to.
SECTION 5.
Question proposed: "That section 5 stand part of the Bill".
When the Minister for Finance advances money to the fund under section 5, it goes into court in the same way under subsection (6) (a) of section 2. I should have thought it would be more normal drafting to put it in in section 5, and that any sum so advanced shall be paid into court to the fund, but I think it is a fact that it must go into the fund under the previous section.
That is correct.
Question put and agreed to.
SECTION 6.
Question proposed: "That section 6 stand part of the Bill".
This is the operative section which would never have been necessary if the Minister had done his part under section 46 of the 1936 Act. I want to draw the Minister's attention now to section 101 of the 1936 Act:
The balance sheet which every assurance company is required by section 7 ... of the Act of 1909 ... shall ... be accompanied by the following certificates, that is to say:—
a certificate, signed by the same persons as are required by the Act of 1909 to sign such balance sheet, in which such persons shall—
certify that the values of all the assets set forth in such balance sheet have been ascertained and reviewed as at the date of such balance sheet and are shown therein at amounts which, in the belief of such persons do not exceed in the aggregate the realisable or market value of such assets after taking into account any investment reserve fund...
When the Minister heard these rumours, on which, I agree, he could not go to the court and ask the court to wind up the company, he could, nevertheless, have gone under section 46 and asked the company under that section, "by notice served upon an insurance company, requiring such company to furnish to him ... such specified explanations, information, accounts, balance sheets, abstracts and statements as the Minister may consider necessary." He had only to look at the last Equitable balance sheet when he heard these rumours. Incidentally, may I say that my recollection is that the Minister did table the Equitable accounts for 1961, as requested by me, but they cannot now be found in the Library. I cannot tell, therefore, who signed the accounts because I am perforce in the situation of having to depend entirely on the abstract schedule.
In the balance sheet of 31st December, 1961, there is a figure of £104,603 included for stocks, shares and debentures. It is the only insurance company in the schedule. Table 19, where the amount of equity stocks is greater, and substantially greater, than the amount of Government securities. I am talking now about non-life companies. The proportion in the other companies is £946,000 to £226,000, £907,000 to £69,000, £312,000 to £178,000, £640,000 to £256,000, £367,000 to £130,000 and £49,000 to £9,000, and in one case alone, the Equitable, was the proportion £71,000 to £104,000.
Now the Minister knows as well as I know that non-life companies do not invest their funds, except very much surplus funds, in equities. The overwhelming proportion of non-life funds is always invested in fixed interest Irish securities rather than other securities. On the face of Table 19 of his own return, the figures at 1961, which must have been available to him a fair time before he moved, there was sticking out like a sore thumb something that required the certificate that should have been given, and probably was given, under section 101. There was, too, an obligation on the Minister to inquire in relation to that sore thumb that stuck out even before he heard the rumours but most certainly when he had heard the rumours, whether section 101 had been complied with in respect of these funds or whether it had not, and if it had not, how the computations had been made.
The Minister was frank enough to say that he had heard rumours. The obligation was on him, as is disclosed in this summary, without hearing any rumours, but surely to goodness there was a double obligation on him, when he heard rumours, to get the information and to make certain that the securities were valued in accordance with the 1936 Act? I know in the case of another insurance company where there was some difficulty over the interpretation of this section that the securities were valued specifically under that section in what I might call the harshest possible way against the company concerned because of the specific provision to review. The fact that the figures stand out like that, for the only company that has this type of imbalance, was surely something which the Minister had an obligation to examine and, not having examined it, should have examined it when he heard the rumours.
His defence that, whether he moved in January, or whether he moved in May, there was going to be loss to somebody, is a pretty bad defence. To say that it does not matter, where things are wrong, that you can let them run on because there is bound to be some loss anyway, is a defence that really does not do justice or credit to the Minister. When he reflects on the matter, he will realise that that statement was not worthy of him personally, or of his office. The fact is that section 101 could not have been complied with in respect of the Tower Insurance Company if there is some £80,000 of this £104,000 that is there on the balance sheet. The Minister had an obligation to deal with it, and still has an obligation to ensure that the appropriate steps are taken against the persons who signed the certificate that did not come up to the strength required in the Act.
Deputy Sweetman referred to my defence. Let me say at the outset that I do not regard myself as being on trial at all. I carried out my functions in relation to the Insurance Act, 1936 as I saw fit, in the best interests of everybody concerned. As the Deputy is aware, as I mentioned a few minutes ago, there was a sequence of events in the Equitable Insurance Company which would have made it difficult in any event to get the facts that section 101 of the 1936 Act enables me to get in certain circumstances, one being the change of auditors. I want to suggest that when I did move in respect of the request for the returns from the Equitable, the returns were made in a matter of days after the final statutory time in which it should have been submitted to me. I do not believe that to have moved in any other manner would have made for any greater expedition in the ultimate bringing of this matter before the High Court, and therefore in the ultimate disclosure of what the true position of the Equitable was.
The ratio between securities, Government and other gilt-edged, as against equity securities is not as ominous as Deputy Sweetman has suggested and certainly not to the point of sticking out like a sore thumb, having regard to the fact that the certification, which was necessary, was done, and having regard to the fact also, as I have already suggested, that it was not my business to audit the accounts of the insurance company nor does Deputy Sweetman suggest that.
What I say is this: I have not been defending myself or my Department in any way. I have given a factual account of the sequence of events which indicated that when I got the accounts on 3rd April, three days after the final statutory date, on the repeated insistence of officials of my Department, they were examined, even though they were incomplete, and then I moved. I moved after a reasonable time, after some weeks, and that is something about which Deputy Sweetman does not upbraid me because he accepts that I was right in trying to do something to avert the situation that had arisen. As far as the bringing to account of the people concerned with this certification is concerned, if there was a false certification as there appears to be, then I suggest it is in the best hands possible in the circumstances, in the hands of a judge of the High Court.
May I say quite categorically that it is the Minister's duty to bring it to the notice of the judge? Secondly, may I say the Minister did not fulfil his functions under the Act. He has functions under section 46 and he acknowledges that he never asked for any information under that section. That is the gravamen of the charge, not in relation to 3rd April. He was quite right in the 3rd April situation, but he never asked for the information under section 46. I admire the Minister for not denying that he had this information. It was common gossip for six months before. I did not think it was common gossip for the period one of my colleagues suggested. The Minister was fully aware of that gossip and never asked for information under section 46. He should have and, if he did, perhaps whatever accumulation arose in that situation might never have arisen.
The Minister has mentioned the levy and I should like to ask him whether he has considered how much the levy is likely to be, taking into consideration what the premium income was in 1962 or 1963. If he examined the premium income for either year, I think he would be in a position now to indicate what percentage he had in mind when he introduced subsection (a) regarding percentages of the annual aggregate income of insurers derived from premiums payable in a specified time. I think, at this stage, considering that this proposal will probably cause an increase in premiums, either temporary or permanent, he should be able to indicate the possible percentage levy that will be applied.
As I told the House already, I propose to discuss that matter with the insurance companies. I think I dealt with it fully and I am surprised at Deputy Rooney asking me the same question over and over again. I said I would consult with the insurance companies and I would recommend to the Minister for Finance a long period. That being so, the levy would be a small amount against the insurance companies, so small that it would not make any difference so far as the level of premiums is concerned. To sum up, the insurance companies might like to have it paid for quickly or might agree with my views that it be extended over a long period.
What period has the Minister in mind?
I do not know the period; I mentioned periods of ten, 15 or 20 years.
I should like to ask the Minister whether he has himself confirmed the circumstances in which the Insurance Act of 1936 was published? I do not think the Minister was then a member of the House.
I was far from it.
I was, and I am familiar with the circumstances in which that Act was passed. That Act was passed to deal largely with the situation that had arisen as a result of the insolvency of a number of insurance companies.
Life companies?
Whether they were life companies or not. Some of them transacted other types of business. If my recollection is clear, the resolve of this House then was that a similar situation would not arise again. At the time the amalgamation took place, a large sum of Government capital had to be injected into the amalgamated company in order to restore solvency. Over the years that have elapsed since then the amalgamated company has of course become a very worthy company, but at the time of its institution, without the injection of a large capital sum by the Minister for Finance, the liabilities then outstanding could not have been met.
The Deputy is referring to the 1938 Act, not the 1936 Act.
It is the amalgamating Act. That amalgamating Act was not embarked upon without protracted and anxious consideration of the whole situation then obtaining. It was present to the mind of the Government in 1936 that a difficult situation existed in Ireland at that time in the life insurance world. We all knew that the condition was very rocky. As the Minister will appreciate, life companies did not present so immediate a problem as companies engaged in accident and general insurance because the claims which were likely to mature against the life companies were actuarially ascertainable. In the atmosphere then obtaining, I think the Insurance Act was designed to ensure that a situation would never be allowed to arise in this country in the future such as was then known to exist in regard to the insurance companies. That situation rapidly progressed but not without long and protracted negotiation to the Insurance Bill of 1938 which created the amalgamated company, which subsequently took over all the other industrial life insurance companies operating in this country.
I cannot imagine that it was absent from the mind of the Minister for Industry and Commerce in his corporate capacity that the time of the Insurance Act of 1936 was one in which we had become aware of what is a catastrophe in the life of any company, that is, that the insurance companies were about to fall. So grave was that emergency considered in 1936, 1937 and 1938 that the companies then in danger of collapse would not be allowed to collapse, without having recourse to any other company. The existing companies were notionally amalgamated. They were combined under deficit and in the amalgamating Act provision made to fill that deficit. The intention was to ensure that such a catastrophe as then happened would never happen in the future.
I am certain that the powers conferred by section 46 were designed to invest the Minister for Industry and Commerce, for the time being, with all the powers he needs. If he heard the rumours, as in 1936, he could move in and get the information he required in respect of any insurance so that time might be taken by the forelock and the mercantile capacity of an insurance company falling could be avoided. The note attached to section 46 has "powers in cases of assurance companies of doubtful solvency". The note does not say "Powers in cases of insolvent insurance companies." It charges the Minister with a specific responsibility in the case of companies of doubtful solvency.
Deputy Sweetman says he will not attach more than six months to the period during which the insolvency of the Equitable Insurance Company was a matter of common gossip. I do not know how the Minister goes about his duties under section 46, but anyone could have told him, I think, long before six months that the rates being quoted by the Equitable Insurance Company for the insurance of scutch mills in County Monaghan were of a character that no sane insurance company had ever quoted since the dawn of time. It was common talk in Monaghan that scutch mills were being insured in Monaghan at premiums approximately one-quarter, or less, of the traditional charge for that highly precarious risk. I do not move in insurance circles, but I heard that talk myself in Monaghan. I do not know if the Minister for Transport and Power is sufficiently familiar with Monaghan to have that kind of information, but if he makes inquiries, I think his supporters will tell him that it was notorious at that time—I do not think there are many scutch mills in Monaghan now because flax has ceased to be widely grown—that the premiums were grotesque.
I am as sure as I am standing here that the belief of this House was that in the 1936 Act we had armed the Minister for Industry and Commerce with all the powers necessary to prevent the kind of catastrophe which was threatened at that time from occurring again. We all recognise that in accordance with ordinary practice the board of directors of a given company are entitled to rely on the certificate of their auditors if they are auditors of good standing, but I do not think there is a parallel between that situation and the statutory duty of the Minister for Industry and Commerce.
I suggest to the Minister that the very note on this Act which says: "Powers in case of insurance companies of doubtful solvency" put on him an obligation in his capacity as Minister, with all the resources at his disposal, to at least take a cursory look at the schedule of assets presented by an insurance company as collateral for risks. I am not suggesting there is any statutory duty on the Minister to go down the whole list of the assets and have them valued, but looking at a long list of securities quoted upon the Stock Exchange, one would get a reasonably approximate idea as to whether the assets were correctly represented by the value placed upon them in the auditors' certificate.
If you are presented with a schedule of assets, the largest item of which is not quoted at all on any Stock Exchange, is it unreasonable to say that the Minister, specifically charged by section 46 of the 1936 Act to watch on behalf of the public the circumstances of any insurance company of doubtful solvency, should say: "Here is an immense part of your assets represented by one security for which there is no quotation and no readily available evidence as to whether it is anything more than a stock certificate"?
Do I greatly exaggerate if I say that the shares of the Tower Insurance Company were not worth much more than the paper and ink requisite to make out a stock certificate? Once that fact came to light, the whole financial foundation on which the Equitable Insurance Company stood collapsed. I cannot but feel that if I were an insurance agent, never mind Minister for Industry and Commerce with the vast resources at his disposal, I would have to scratch my head and consider very carefully my clients' rights if I had put their affairs into the hands of an insurance company the assets of which upon close examination proved to be substantially non-existent.
Deputy Sweetman said he approves the Minister's frankness in admitting the course of action he pursued, but I am at a loss to understand how, in view of section 46 of the 1936 Act, the Minister does not find himself obliged to say: "Perhaps I did not act with sufficient circumspection and vigilance."
I said I approved after 3rd April.
I feel the Minister has fallen down very gravely on this matter. The Minister will agree that for all the acts of his Department, he is personally responsible to this House. He takes the credit and accepts the blame. I think he should say quite frankly: "I do not think I have acted under section 46 of the 1936 Act with all the viligance and expedition that might reasonably be expected." I am bound to say I do not think he did. I feel that the Minister's failure to discharge the duty devolving upon him under section 46, to the grave detriment of certain individuals who, I think, were entitled to assume that he did discharge this obligation, would constitute a very equitable claim against the Government for full compensation.
If I were an insurance agent and had familiarised myself with section 46 of the 1936 Insurance Act, if I had put the affairs of my clients in the hands of an insurance company of this kind, I would be inclined to look at a balance sheet and say: "It looks very queer to me but, my gracious me, if they have satisfied the Minister under section 46, is there any obligation on me to check on the Minister for Industry and Commerce?" I ask the Minister could he find it in his conscience to blame an insurance agent who looked at a balance sheet and felt there was something queer about it because the value of the principal asset could not be tested by any public quotation, found that the premium quoted was very competitive, and said: "After all, under section 46 the Minister is responsible in the case of any company of doubtful solvency."
I think he would be justified in saying that the company was not doubtful, because if it were, the Minister would move, and if he moved and found anything wrong, which his inquiries would bring to light, the appropriate steps would be taken to put the company out of business. If I put it that way to the Minister, would the Minister say that an insurance agent who depended on the vigilance and prudence of the Minister for Industry and Commerce for the time being, armed with the powers conferred on him by section 46 of the 1936 Insurance Act, was seriously remiss? I do not think he would.
The purpose of section 46 was to put that duty on the Minister. The Act was passed in the light of the experience at that time of the catastrophe that had overtaken the company and its customers, and we intended it to be used. Either we did not put in it what we intended at the time, or else in 1964 the Minister had not used it as we assumed he would when we made that law. I should be glad to hear from the Minister, supposing he had used those powers exhaustively which he had under section 46, might a great deal of this trouble not have been averted? If he did not use them, he is in a position to tell the House why.
I dealt with all the points raised by the Deputy.
I am glad the Minister believes he has. I do not believe the public will.
I have got the accounts since from the Library. They show the picture of the ordinary stocks —£83,150 which I understand from rumour is the entire figure—in even more detail. The Third Schedule includes a certificate. The Minister has an obligation to consider whether the people who gave that certificate, and who are still alive, would not have the obligation of making the payments required to this fund rather than the ordinary public who have been duped. I do not know the financial strength of the persons concerned. I know that the Managing Director died. However, specific certificates were given and the matter stuck out like a sore thumb. We can see all the accounts, one next the other, in the summary. Nothing was done when that summary was put together and when it should have been stopped.
The Minister knew that there were what I shall call euphemistically rumours around. Nothing was done under section 46. The Minister has come here and said he does not believe the section gave him the power or the duty of evaluating assets. Section 46 is utterly meaningless unless it gave him that power. The obligation was put on him by that section and it was not discharged. The Minister does not admit it, but he stands convicted before the public of not having taken the action which section 46 of the 1936 Act deliberately empowers him to take.
I believe I took the action that was designed most expeditiously to give me the information I required and that was the requesting of the accounts urgently and repeatedly. I believe that to take action otherwise would not have been as expeditious in coming to the conclusion that was in fact effected.
The Minister and I will agree to differ. I venture to say that everybody who examines the situation will know who is right.
Question put and agreed to.
Section 7 agreed to.
SECTION 8.
Question proposed: "That section 8 stand part of the Bill."
I do not know whether or not I am in order to raise this matter at this stage but I feel that a deposit of £100,000 should not be sufficient for the issue of a licence. I think the insurance company should have sufficient assets, apart from the sum deposited, in order to permit them to go into active business.
The fact that an insurance company is able to gather together £100,000 and then get a licence for the transaction would not appear to be adequate. That is the kind of situation that this fund might meet, namely to meet the liabilities of some company that would go out of business because they have no assets except a sufficient sum to deposit in order to get the licence, that is, a sum of £100,000. Therefore, I feel that the section is not satisfactory. It may be satisfactory in so far as a deposit for the issue of a licence is concerned but it should require more than a deposit before a licence can be issued.
There is also the requirement of capital of the company, of which £100,000 must be paid up.
£200,000 issued and £100,000 paid up. Is that not right?
Question put and agreed to.
Sections 9 to 16, inclusive, agreed to.
Title agreed to.
Bill reported with amendments.
Next stage?
Could we have it now?
I should like to try my ingenuity, between now and tomorrow morning, to draft an amendment to section 3.
I understand that the Seanad will not be sitting next week and I shall not find it possible to attend on the following week.
I shall agree to the Report Stage now and try to get one of my colleagues in the Seanad to see if he can deal with it.
Bill received for final consideration and passed.