« ZurückWeiter »
which the assets of the Statutory Funds may be invested, they are of opinion that these assets should not, in future, be invested without the sanction of the Court in any share or interest in any insurance business, and have given effect to their views in Clause 4 (2) of the Bill.
40. Policy holders' interests in surplus.-The scheme worked out in Clause 17 of the Bill for dealing with the surplus of the several insurance Statutory Funds, is no doubt open to the criticism that a somewhat wide discretion is reserved to the Court in winding up as to the allocation of this surplus. The Committee consider this proposal to be justified, because there are many cases where the contractual right of a policy-holder to share in profits may be doubtful or may prove non-existent, but the course of business and practice of the company, the terms of its prospectus, &c., have been such as to make it improper that, at all events on a solvent liquidation, no allowance in respect of profits should be made to the policy-holders. The Committee have in Clause 17 of the Bill sought to make provision for dealing adequately with such cases. To illustrate the effect of the Committee's recommendations the case may be taken of a Company with a successful Life business which has for ten years past allotted nine-tenths of the profits of that business to Life policy-holders but has gone into liquidation owing to losses in other classes of business. The surplus shown on valuation of the Life assets would, apparently, as the Act stands, be lost to the Life policy-holders. Under Clause 16 (1) of the Bill the Life business would be valued on the basis set out in Part I of the Seventh Schedule. Under Clause 17 the surplus thus appearing (called in the clause the primâ facie" surplus) would be allocated as to one-tenth to the general assets, and as to the remaining nine-tenths to the policy-holders as part of the assets available for transfer to a new company or available for the continuance of the Life business as a separate concern. Should it be found necessary to wind up the Life business, the Life assets (including the policy-holders' share of the "prima facie " surplus) will be distributed among the individual policy-holders under a scheme sanctioned (no doubt after due consideration of the actuarial advice) by the Court, instead of being distributed under the rigid rules which the Act imposes under Part A of the Sixth Schedule.
41. Accounts and Returns.-Section 9 of the Act, as to audit, is in substance re-enacted by Clause 7 of the Bill. The important provisions contained in Sections 4, 5, 6 and 7 of the Act, and Schedules 1 to 5 are re-enacted with very extensive modifications by Clauses 8 and 9 of the Bill and Schedules 2 to 6. It is convenient to note the following points :
(a) The normal financial year is to run from 1st January to 31st December;
(b) Notwithstanding that some difference of actuarial opinion is disclosed by the evidence as to the value of the 5th Schedule return (now represented by the 6th Schedule
to the Bill) the Committee recommend the retention of that return with the modifications appearing in the 6th Schedule to the Bill. It is argued that the preparation of the elaborate data to be furnished in that return involves labour and expense disproportionate to the value of it, and that the soundness or otherwise of the actuarial position of a Company can be tested by competent experts without the aid of this return. The Committee are, however, not satisfied that a sufficient case has been made for abolishing the duty of making such a return; and they believe that the return is important not only for the information furnished, but for the security it indirectly affords against loose methods of business. Provisions are proposed in Clause 8 (8) to enable modifications to be made by Order in Council as to returns. This will give a very desirable elasticity to these provisions, while the frame of the clause dealing with this matter will, in the opinion of the Committee, protect the companies from any danger of hasty or ill-considered modifications being made. Clause 8 (7) (which supersedes Section 22) enables the Board of Trade to temper the requirements of the Bill to the peculiar circumstances of any particular company. 42. A comparison of Schedules 1 to 5 of the Act with Schedules 2 to 6 of the Bill will show that the Committee propose that the accounts and returns to be furnished shall, in future, be rendered in greater detail than was required by the Act. The uniform presentation of this detail in the manner indicated in the Schedules will furnish valuable protection to the public without imposing any undue burden upon the offices. The Committee desire to draw particular attention to the following points :
(i) Any combined balance sheet or combined revenue account is to be so framed as to minimise the chance of its character and meaning being misinterpreted. (Second Schedule, Part I, Regulation 3; and Fourth Schedule, Part I, Regulation 3);
(ii) Guarantees are to be stated. (Second Schedule, Part I, Regulation 4);
(iii) Foreign deposits are to be mentioned, and if forming part of a statutory fund are to be stated in detail. (Second Schedule, Part I, Regulation 5);
(iv) The basis of the value of the assets is to be clearly set out and certified. (Second Schedule, Part I, Regulations 6-9);
(v) Shareholders' capital will be set out so as to show the amount of any uncalled capital. (Second Schedule, Form (A) );
(vi) If any loans or other amounts due from the insurer are secured by deposits of some of the insurer's securities the facts must be stated. (Second Schedule, Form A, Note (d));
(vii) Contingent liabilities are to be set out. (Second Schedule, Form A, Note (f));
(viii) Investments in, and loans to, controlled companies are to be dealt with specially. (Second Schedule, Form A, Notes (g) and (i) );
(ix) Amounts due from directors and officials (unless fully secured) must be shown separately. (Second Schedule, Form A, Note (j));
(x) The Profit and Loss Account will, in future, be in two parts, the first showing the results of the year, and the second (Appropriation Account) will show the amounts, if any, of dividend and any other allocations of profits. (Third Schedule, Forms B and C);
(xi) The provisions of the Fourth Schedule, Part I, Regulation 6, will make it necessary to exclude "Not taken up" policies from the statement of new insurances;
(xii) "Group insurance" is to be separately stated. (Fourth Schedule, Part I, Regulation 6; Fifth Schedule, Form I, Note 2; and Sixth Schedule, Part II, Paragraph 6);
(xiii) Provision has been made under Part II, C of the Fifth Schedule for statements in respect of Continuous Disability Business; and provision has been made under Part III for an "Abbreviated Abstract" for use by companies which make annual valuations.
43. Miscellaneous provisions.-Clauses 11 and 12 of the Bill re-enact Sections 10, 11 and 12 of the Act with mere drafting amendments.
44. Transfers and Amalgamations.-Clauses 13 and 14 of the Bill, with which must be read Clause 25, re-enact sections 13 and 14 of the Act with amendments in certain points of detail on which comment appears unnecessary.
45. It will be observed that Section 15 of the Act is not re-enacted. This section seems to the Committee to be obsolete and misleading since, as the Companies Acts now stand, any contingent creditor (and a policy-holder must, as the Committee think, necessarily come within this description) may petition for the winding up of a company.
46. Clause 15 reproduces Section 18 of the Act with some unimportant amendments.
47. Clause 16 and the Seventh Schedule of the Bill have already been referred to under the head of "Separation of Assets" they supersede Section 17 and the Sixth and Seventh Schedules of the Act.
48. Winding-up.-Clause 18 of the Bill contains a new provision to enable part of the business of a composite company to be carried on while the remainder is wound up, and seems desirable as an addendum to the adoption of the principle of separation of assets, in order to preserve and work out the rights of policy-holders of a particular class in regard to assets allocated
to business of that class.
Clause 17 works out, in winding-up, the principle that each separated fund is to secure to the policyholders concerned not only the full satisfaction of their contract rights, but also (as against shareholders and also holders of policies issued in other classes of business) that part of the unallocated surplus derived from their own class of business which belongs to them either by contract or in accordance with the practice of the Company. This is an expansion of the provision of the Act (Section 3 (2)) that "a fund of any "particular class shall be as absolutely the security of the policy-holders of that class as though it belonged to a company carrying on no other business than assurance business "of that class."
49. Intervention at the instance of the Board of Trade.— Clause 19 enables an insurance company to be wound up if it disregards the Act, and also where the Court considers that it is insolvent; but these grounds for winding up are to be available only on the petition of the Attorney-General who, it is anticipated, would, normally, use these powers where the Board of Trade consider it desirable. The Committee attach great importance to the effect which this clause should have in enabling the Board of Trade to bring pressure to bear on companies of doubtful solvency. The clause will also furnish the Board of Trade with a very powerful and, in the opinion of the Committee, very necessary weapon for securing compliance with the requirements of the Bill.
50: Liability of Directors.-Clause 20 (with which must be read Clause 4 (4)) deals with the personal liability of Directors for failure to observe the law in regard to separation of funds. The Committee are satisfied that this clause is essential for the protection of the public and also that its enactment will occasion. no hardship.
51. Inspection.-Clause 21 states the circumstances in which the Board of Trade may obtain from the Court an Order enabling an Inspector to be appointed to investigate the affairs of an In the view of the Committee an application for such an order ought not to be made in open court, and the Committee recommend that Rules of Court framed under the section should so provide.
52. Underwriters.-Clauses 22, 23 and 24 of the Bill are a re-enactment of Sections 28 (2), and the Eighth Schedule of the Act with certain amendments, due in great part to the extension of the Act to cover Marine insurance. With these clauses should be read the proviso to Clause 34 (2). The existing provisions recognising the peculiar position and practice of Underwriters have worked satisfactorily, and the Committee recommend that these provisions be re-enacted with these amendments.
53. Schemes.-Clause 25 of the Bill re-enacts, with amendments of minor importance, the provisions of Section 13 of the Act relating to the machinery of schemes for amalgamation and
transfer, but is so drafted as to apply to schemes for partial winding-up under Clause 18.
54. Offences and Penalties.-Clauses 31 and 32 of the Bill supersede Sections 23, 24 and 25 of the Act, with a number of necessary amendments of detail.
55. Documents deposited with the Board of Trade, Rule making Powers, &c.-Clause 26 re-enacts (with amendments) Sections 20, 21 and 27 and contains in the proviso to Sub-clause 1 provisions aimed at shortening and simplifying the documents which are to be laid before Parliament. Clause 27 (which must be read in conjunction with the definition of "Policy owner" in Clause 34) replaces Section 26. Clauses 28, 29 and 30 contain various provisions for the rule-making and similar powers necessary to work out the provisions of the Act, as extended by the Bill.
56. Definitions.-Clause 33 embodies a classification of the various classes of insurance business and in this respect supersedes the definition in section 1 of the Act.
57. Interpretation.-Clause 34 supersedes Section 29 of the Act and contains a number of necessary definitions. It is to be noted that the definition of "insurer" in Clause 34 is so framed as to cover the possible case of an insurance business being carried on by an individual or partnership. This possibility is partially dealt with in the Act (see the opening words of section 1), but the consequences in certain circumstances, e.g., bankruptcy, are not fully worked out in the Act. The Bill has, the Committee believe, been so drafted as to cover the case of individuals and partners with sufficient completeness.
58. Industrial Assurance.-In view of the Industrial Assurance Act, 1923, the Committee have endeavoured, in drafting the Bill, to avoid any alteration of the law in regard to Industrial Assurance companies as such, save in so far as relates to the separation of the assets of the Industrial Assurance fund. They have, however, found it necessary to introduce Clause 35 into the Bill in order to ensure that the alterations of detail in regard to assurance business, which are embodied in the Bill, should work in with the provisions of the Industrial Assurance Act, 1923, which has put the Industrial Assurance Commissioner in regard to Industrial assurance into the position occupied by the Board of Trade in regard to assurance generally. The amendments to the Industrial Assurance Act, 1923, embodied in the Eighth Schedule are purely consequential amendments necessitated by the repeal of the Act of 1909.
59. Re-insurance.-Clause 36 of the Bill deals with re-insurance in the manner suggested in the Committee's Interim. Report (see Appendix No. 2 below). Sub-clause 2 makes the necessary provision for the peculiar case of Underwriters.
60. Exemptions, &c.-Clause 37 (1) of the Bill re-enacts section 28 (1) of the Act. Clause 37 (2) reproduces the exemption