were desirable in the Act of 1909, and, in particular, in some of the Schedules to that Act, there were certain fundamental points in regard to which an extension of the law was desirable. In particular they became convinced 66 (i) That the system of providing separate funds " in respect of certain classes of business, copied by the Act of 1909 from the Life Assurance Companies Acts, 1870 and 1872, but restricted by the provision (Act of 1909, proviso to Section 3 (1)) that separation of investments was not necessary, must be reconsidered, and that separation of assets, with consequent separation of balance sheets, would in certain cases be found necessary. (ii) That the growth of composite companies made it necessary to make detailed provision to safeguard the interest of life policy-holders in the assets representing the life fund, particularly in view of doubts which became apparent as to the operation, in regard to life policy-holders in such companies, of the provisions of the Act of 1909. (iii) That the scheme of the Act of 1909, dealing primarily, with five defined classes of business (Life, Fire, Personal Accident, Employers' Liability and Bond Investment), and dealing with certain other classes of business (Marine, Sinking Fund and Capital Redemption) only in so far as the latter classes were combined in one company with one or more of the former classes, ought to be entirely recast, especially in view of the desirability of bringing all Marine insurance companies under the provisions of the Act. 8. It became clear to the Committee that it would be easy for them to express their conclusions on these matters in general terms, especially as, on the main points, there was but little divergence of opinion disclosed in evidence; but that the real difficulties would be found to emerge only on the drafting of an amending Bill, and in preparing the alterations necessary in the Schedules to the Act of 1909 in order to work out the result of thus modifying the basis of the Act. 9. In these circumstances the Board of Trade, at the suggestion of the Committee, thought proper to invite Mr. L. A. J. Granville Ram, Third Parliamentary Counsel to the Treasury, to join the Committee in order to assist them in embodying their conclusions in the form of a Bill. The draft Bill (which is printed in Appendix No. 3 to this Report) contains the Committee's recommendations for the repeal of the Act of 1909 and its reenactment, with those amendments which the Committee think necessary. 10. The Committee have thought it convenient to set out in Part II of this Report their comments on the draft Bill with particular reference to the modifications in the law which are embodied therein and to the reasons which have actuated the Committee in suggesting those modifications. 11. The Committee find it necessary, however, to deal separately with certain questions which have been discussed before them, but fall outside the purview of Part II of this Report. 12. A considerable body of evidence was placed before the Committee in favour of increasing the powers of the Board of Trade to take action either upon breach by insurance companies of statutory provisions or in cases of apprehended insolvency. Certain amendments of the law are recommended by the Committee as appears from the draft Bill and from Part II of this Report. In this connection various suggestions were made for the constitution of some kind of advisory Committee, which should be consulted before the exercise of such powers, or even should be given a veto on such exercise. After very careful consideration the Committee do not recommend legislation in this direction. It will always be open to the Board of Trade to keep in close touch in the future, as indeed they have in the past, with the best technical and professional views in regard to the various insurance companies and their respective positions. It may well be that, in administering the legislation which the Committee recommend, the Board of Trade may find it convenient to obtain advice by means of some more or less informal committee of persons connected with or even nominated by the various organisations connected with insurance. The Committee are, however, satisfied that it would be a mistake to set up any form of statutory Committee for this purpose. While some witnesses have expressed some apprehension at an increase of official power in the hands of the Board of Trade, the Committee are satisfied that the ordinary restraints imposed by public opinion and by Parliamentary control will be amply sufficient to prevent any possibility of the Board of Trade taking unnecessary action; and it will be observed that the chief powers recommended are merely powers to set in motion machinery leading to a hearing in a Court of law. 13. In the course of the evidence placed before the Committee reference was made to certain matters lying rather within the sphere of general Company law than within the scope of the Committee, and notably to the following: (a) disclosure in the accounts of Insurance Companies of loans to directors and officials; and (b) treatment in the accounts of a holding company of its holdings in controlled or subsidiary companies. The former subject is dealt with in paragraph 48 of the Report,* dated 8th May, 1926, of the Committee appointed in 1925 by the Board of Trade to consider what amendments are desirable in the Companies Acts; and the latter subject in paragraph 72 (vii) of the same Report. This Committee have, in the Second Schedule to the Bill, provided for disclosure of loans to directors and officials (unless fully secured), and for the furnishing of particulars in regard to loans to and holdings in controlled Companies, as defined in Regulation No. 9 in Part I of the Second Schedule. * Cmd. 2657 (1926). 14. The Committee have considered whether any discrimination should be made as regards quantum of deposit between British and non-British companies. It has been suggested that the deposit required by the 1909 Act as a condition of commencing business here offers an insufficient security that a non-British Company will meet its obligations to British policy-holders. On the other hand it was pointed out with (as the Committee consider) irresistible force that discrimination against non-British Companies must almost inevitably lead to similar retaliatory legislation against British Companies abroad. To this it may be added that, in the view of the Committee, the primary purpose served by exacting a deposit is to discourage unsubstantial and purely speculative concerns from undertaking insurance business; it is not, in the opinion of the Committee, primarily to the deposit that a policy-holder should look for security; the deposit must, unless enormously increased, be entirely inadequate if it is to be so regarded. The best protection for the policy-holder is to be found in the publicity as to the insuring company's position resulting from the necessity of making the statutory returns. 15. The Committee's attention has been drawn to a point the importance of which has, they think, been somewhat exaggerated. The depreciation in gilt-edged securities, as compared with pre-war prices, has reduced statutory deposits made under the 1909 Act to a value below, and in some cases very considerably below, the value at date of deposit. This would be important if the deposit were properly to be regarded as a real security for the policy-holders; but if the true view of the nature of the deposit is as expressed in the preceding paragraph depreciation becomes a matter of minor importance. For this reason the Committee have not thought it necessary to recommend any statutory provision for dealing with depreciation in value of deposits. 16. Some evidence was presented to the Committee to support the suggestion that legislative protection is needed to prevent the result, which has in some cases (so the Committee are told) ensued from amalgamations, that some members of the staffs of the amalgamating companies have been displaced. It was not, however, suggested that legislation could be seriously advocated which would force an insurance company to continue to employ staff which had been found to be redundant, and the Committee cannot think that it would be practicable or just to prevent or interfere with an amalgamation simply because it might or would enable economies to be effected by a reduction of staff. The Committee accordingly make no recommendation on this head. 17. The Committee were invited by the representatives of certain bodies of Insurance Brokers and Agents to recommend legislation which would (a) institute some means of registering or licensing insurance agents; (b) prevent insurance agents sharing with their clients commission paid by the insuring company; and (c) prevent an insuring company offering more favourable terms to one proposer or one agent than those given to another proposer or another agent. The Committee felt some doubt whether the recommendation of legislation of this kind would not be outside the purview of their reference. But, however that may be, the evidence before them appeared to them quite insufficient to justify any system of compulsory registration or licence for insurance agents, and no practicable scheme for ensuring the proposed restrictions as to sharing commission and as to preventing differentiation was placed before them. The Committee desire to make it clear that they are not satisfied that even if a practicable scheme for achieving these ends could be devised there is any need for it in the interests either of the public or of the companies. 18. In preparing the Forms of Return scheduled to the proposed Bill the Committee have treated "Group Insurance as a special type of Life insurance (see Fifth Schedule, Form I, note 2). It has not been considered necessary to deal with "Newspaper Insurance" separately as, so far as the Committee can ascertain, such insurance involves either a contract between the purchaser of the paper and an insurance company, or (in very rare cases) a contract between the purchaser and the newspaper proprietor as insurer. In either case the ordinary statutory provisions, as extended in the proposed Bill, appear to the Committee to be adequate. 19. The attention of the Committee has been called to a difficulty which has emerged by reason of the increasing practice of issuing policies for the benefit of children. It has been recently held in the case of In re Engelbach's Estate, [1924] 2 Ch. 348, that such an assurance remains the property of the parent who pays the premium, notwithstanding that the infant is named as payee or as intended beneficiary. It has been suggested to the Committee that a clause should be added to the draft Bill to alter the law in this respect and make the benefit of the assurance the property (either absolutely or in certain events) of the infant. The Committee feel, however, the gravest doubts whether such an enactment would not fall outside the scope of an Act intended merely to extend and amend the Act of 1909, as it would trench upon the law governing the property of infants and the creation of trusts and settlements. If this matter is to be dealt with it should, the Committee think, be by a separate Act, and for this reason the Committee make no recommendation on this subject. PART II. 20. The Committee proceed to comment on matters arising in connection with the draft Bill, with particular reference to the modifications thereby to be effected in the Assurance Companies Act, 1909, herein referred to as "the Act." 21. Definition of "Insurance business."-A fundamental difference in the Bill, as compared with the Act, is that the Bill defines 66 insurance business (clause 33 (1)) in terms which cover every class of insurance business, while the Act referred, primarily, to the five classes of business defined in section 1, viz. :-(a) Life; (b) Fire; (c) Personal Accident; (d) Employers' Liability; and (e) Bond Investment. 22. The Committee are satisfied (notwithstanding some differences of opinion between the witnesses) that the time has come when (a) Marine insurance, and (b) Motor vehicle insurance business should be brought within the Act. 23. Marine Insurance business.-This class of business is affected by the Act to the extent that an insurer carrying on any one or more of the five classes of business enumerated in Section 1 of the Act is bound to render returns of any marine business which it carries on, while an insurer doing marine business only remains entirely outside the Act. The Committee see no reason for continuing this anomaly. The Bill has the effect of bringing the marine business done by Lloyd's and other bodies of underwriters into the scope of the legislation. By Part II, Clauses 22 to 24, the Bill recognises the peculiar position of Lloyd's underwriters by placing them in a position as regards marine business corresponding to that in which they were placed by the Act as regards the classes of business enumerated in the Act. The result is (in effect) that, so long as the business of Lloyd's is carried on with the well-established safeguards which have hitherto proved satisfactory, the position of Lloyd's underwriters will be substantially unaffected. These provisions will also be applicable to other bodies of underwriters, but after receiving information, both in writing and verbally, from representatives of the Association of Underwriters and Insurance Brokers in Glasgow, the Committee are satisfied that no sufficient cause has been shown for reducing the requirements of Part II of the Bill. 24. Motor Vehicle Insurance business.-The enormous increase in motor vehicle insurance business which has taken place since 1909 makes it, in the opinion of the Committee, essential that that class of business should be brought within the legislation. The evidence placed before the Committee satisfied them that it is a public danger that many branches of motor vehicle insurance can, as the law stands, be undertaken without such safeguards as the Act lays down as requisite for accident business as defined in the Act. 25. It would have been possible to amend the Act by adding marine and motor vehicle business to the five classes of business enumerated in the Act. The Committee are, however, of opinion that the preferable course (particularly in view of the modern extension of insurance business to all sorts of new risks) is to treat insurance business as a whole. The Committee recognise that this plan involves bringing within the Act certain minor classes of insurance (e.g., live stock insurance, plate glass insurance |