INSURANCE FIRMS

Evening Post, Volume CXXX, Issue 27, 31 July 1940, Page 5

INSURANCE FIRMS

DEPOSITS REQUIRED

COMPANIES' LIABILITY

A NEW MEASURE

Under a measure known as the Insurance Companies Bill, introduced and read a first time in the House of Representatives yesterday, insurance companies operating in New Zealand are to be required to lodge substantial deposits with the Public Trustee as security against liabilities. The Bill also gives the Minister of Justice power to order the winding up of any company doubtful of meeting its liabilities. Local companies commencing business are required first to deposit the following sums:—For fire insurance business, £22,500; for employers' liability insurance business, £22,500; for other classes of insurance business except under the third-party risk, £5000. Local companies already in operation must deposit £1000, together with a further £1000 for each complete £2500 of premium income during the last financial year until the stipulated deposit is reached. All companies commencing thirdparty risk business must first deposit £10,000. Those in operation will have to deposit £1000. together with a fur- I ther £1000 for each £2500 of premium! income until £10,000 is reached. ' Instead of depositing the whole of the amount in money, companies in business may deposit not less than one-fifth in money and the balance in securities. ORIGIN OF BILL. The origin of the Bill, said the Minister of Finance (the Hon. W. Nash), lay in the difficulties that had been occasioned people who had taken out cover for insurance risks and had then found that they themselves were accepting liabilities. A year or so ago there was one company selling insurance, and, having sold insurance to a person, that person, when he took out the policy, became liable for payments made to other people. The individual became a shareholder in the company. A number of policy holders became liable for payments of fairlylarge sums. Under the new Bill this would be avoided, because it extended the principles in connection with deposits. Existing companies, continued the Minister, must also lodge deposits, but they were allowed to lodge a deposit of £1000 and then 40 per cent, of their annual premiums until £22,500 had been lodged in respect of flre and employers' liabilities and the £5000 for other classes of business. To make it easy for companies not able to lodge £1000, provision was made for them to lodge securities up to 80 per cent. Then the same principle applied providing for the companies lodging 40 per cent, of their total premiums each year until the sums for fire, employers', and the other risks were reached. The Minister was asked if the Bill affected local bodies carrying their own insurance. There was a clause in the Bill, said the Minister, which exempted mutual flre insurance companies that were built up on the Mutual Fire Insurance Act principle. STABILITY OF COMPANIES. The other part of the Bill, said the Minister, gave power to the Minister of Justice to examine the books and accounts of insurance companies if there was doubt at any time of their stability. There were three parties interested in insurance companies—the shareholders, creditors, and the policy holders. If circumstances so warranted, the Minister of Justice would be able to obtain an order to examine the book^ of any insurance company and determine whether it was competent or able to meet the liabilities that it had taken premiums to cover. If it was determined that a company was not able to do this, the Minister of Justice could order that the company be wound up. There were also certain minor provisions in the Bill, said Mr. Nash, in respect to balance-sheets and returns that had to be sent in.