§ 8.22 p.m.
§ The Earl of Northesk
My Lords, I beg to move that the House do now resolve itself into Committee on this Bill.
§ Moved, That the House do now resolve itself into Committee.—(The Earl of Northesk.)
§ On Question, Motion agreed to.
§ House in Committee accordingly.
§ [The DEPUTY CHAIRMAN OF COMMITTEES (Baroness Cox) in the Chair.]
§ Clauses 1 and 2 agreed to.
§ The Earl of Northesk moved Amendment No. 1:
§ After Clause 2, insert the following new clause:
§ Consequential amendments
§ .—(1) Schedule 9A to the Companies Act 1985 and Schedule 9A to the Companies (Northern Ireland) Order 1986 (form and content of accounts of insurance companies and groups) shall be amended as follows.
(2) In Note (24) on the balance sheet format set out in Section B—
(a) after "(Liabilities item C.5)" there shall be inserted—
This item shall comprise the amount of any reserve maintained by the company under section 34A of the Insurance Companies Act 1982."; and
(b) after "This item shall" there shall be inserted "also".
§ (3) For paragraph 50 there shall be substituted—
§ "Equalisation reserves
§ 50. The amount of any reserve maintained—
- (a) under section 34A of the Insurance Companies Act 1982 ("the 1982 Act"), or
- (b) under regulation 76 of, and Schedule 14 to, the Insurance Companies Regulations 1994 ("the 1994 Regulations"),
§ The noble Earl said: In addressing Amendment No. 1, I should also like to take this opportunity to speak to Amendment No. 2. As I am sure the Committee is aware, previous regulations concerning equalisation reserves have applied solely to credit equalisation reserves on a perceived basis, when they were framed, that no need was required for the creation of any other form of regulated equalisation reserve. Clearly, should the Bill be enacted, this situation will change in that it is proposed that regulations will come into force requiring insurance companies to maintain equalisation reserves for certain volatile classes of non-life business.
§ The purpose of the amendments, as encapsulated in subsection (2), paragraphs (a) and (b) of Amendment No. 1, is straightforward; namely, that of requiring insurance companies to show all the equalisation reserves that they are required to maintain as a technical provision under "Liabilities item C5" in the balance sheet format.
§ Subsection (3) pursues the logic of subsection (2) in ensuring consistency between existing regulations concerned with the maintenance of credit equalisation reserves, as currently regulated for under Regulation 76 of, and Schedule 14 to, the Insurance Companies Regulations 1994, and the Bill's intention that further equalisation reserves be regulated for for certain classes of volatile non-life business.
§ In this context I should point out that we are obliged, under Council Directive 91/674—commonly called the insurance accounts directive—to regulate that any equalisation reserves that are a legal or administrative requirement be accounted for in this way. I made it plain at Second Reading that a primary aim of the Bill is to put our insurance industry on a more equal footing with its European counterparts. It therefore strikes me that it would be somewhat self-defeating to go through the motions of passing the Bill without ensuring that its framework is operable within the European context.
§ It is the case that this particular aspect of the proposed regulations could have been achieved via the mechanism of statutory instrument. My own view is that it is fundamental to the successful operation of the equalisation reserves scheme and that therefore it is wholly appropriate that it should appear on the face of the Bill.
§ Amendment No. 2 simply seeks to ensure that commencement of the accounting requirement lies in tandem with the regulations themselves. In conclusion, my amendments seek to ensure that the equalisation reserves regulations, as and when they come into force, 148 are properly and adequately framed to be workable in a European context. This, after all, is a prime objective of the Bill, to afford our insurance industry, with its deserved worldwide reputation, the opportunity to compete on a more equal footing in the single market. I beg to move.
§ Lord Graham of Edmonton
My noble friend Lord Peston has asked me to say in his absence that he certainly appreciates the effect of the amendments, and he approves them. Therefore we have no objection to them.
§ Lord Inglewood
The Government fully support the new clauses proposed by the noble Earl, Lord Northesk, which he so lucidly explained. Just as he spoke to both the amendments in his remarks, I shall do the same. Amendment No. 1 is clearly necessary so that the Companies Act 1985 and the Companies (Northern Ireland) Order 1986 comply with our obligations under European law. It also ensures that those preparing insurance company accounts will know clearly how to report equalisation reserves set up as a result of regulations made in the Bill.
As regards Amendment No. 2, again the Government fully support this proposed amendment which enables amendments to the Companies Act and the Companies (Northern Ireland) Order to be brought into force at the same time as the introduction of regulations. This is logical since it is only at that time that they will have any practical effect.
§ The Earl of Northesk
I am keen to sustain this note of brevity. Therefore I wish simply to express my gratitude both to the noble Lord, Lord Peston, in absentia, and to my noble friend Lord Inglewood for their support.
§ On Question, amendment agreed to.
§ Clause 3 [Short title, commencement and extent]:
§ The Earl of Northesk moved Amendment No. 2:
§ Page 2, line 23, leave out ("Section 1") and insert ("Sections 1 and (Consequential amendments)").
§ On Question, amendment agreed to.
§ Clause 3, as amended, agreed to.
§ House resumed: Bill reported with amendments.