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Rowe, Andrew (Mid Kent)

Rumbold, Rt Hon Dame Angela

Ryder, Rt Hon Richard

Sackville, Tom

Sainsbury, Rt Hon Tim

Scott, Rt Hon Nicholas

Shaw, David (Dover)

Shaw, Sir Giles (Pudsey)

Shephard, Rt Hon Gillian

Shepherd, Colin (Hereford)

Shepherd, Richard (Aldridge)

Shersby, Michael

Skeet, Sir Trevor

Smith, Tim (Beaconsfield)

Soames, Nicholas

Speed, Sir Keith

Spencer, Sir Derek

Spicer, Sir James (W Dorset)

Spicer, Michael (S Worcs)

Spink, Dr Robert

Spring, Richard

Sproat, Iain

Squire, Robin (Hornchurch)

Stanley, Rt Hon Sir John

Steen, Anthony

Stephen, Michael

Stern, Michael

Stewart, Allan

Streeter, Gary

Sumberg, David

Sweeney, Walter

Sykes, John

Tapsell, Sir Peter

Taylor, Ian (Esher)

Taylor, John M. (Solihull)

Taylor, Sir Teddy (Southend, E)

Temple-Morris, Peter

Thompson, Sir Donald (C'er V)

Thompson, Patrick (Norwich N)

Thornton, Sir Malcolm

Thurnham, Peter

Townend, John (Bridlington)

Townsend, Cyril D. (Bexl'yh'th)

Tracey, Richard

Tredinnick, David

Trend, Michael

Trotter, Neville

Twinn, Dr Ian

Vaughan, Sir Gerard

Viggers, Peter

Waldegrave, Rt Hon William

Walker, Bill (N Tayside)

Waller, Gary

Wardle, Charles (Bexhill)

Waterson, Nigel

Watts, John

Wells, Bowen

Wheeler, Rt Hon Sir John

Whitney, Ray

Whittingdale, John

Wiggin, Sir Jerry

Wilkinson, John

Willetts, David

Winterton, Mrs Ann (Congleton)

Wolfson, Mark

Wood, Timothy

Yeo, Tim

Young, Sir George (Acton)

Tellers for the Noes :

Mr. Sidney Chapman and

Mr. David Lightbown.

Question accordingly negatived .

Question , That the proposed words be there added, put forthwith pursuant to Standing Order No. 30 (Questions on amendments) and agreed to .

Madam Speaker-- forthwith declared the main Question, as amended, to be agreed to .

Resolved ,

That this House recognises that progress has recently been made in improving British Rail's services ; believes that further necessary improvements for rail users can best be achieved by creating the opportunity for introducing into the railways private sector ownership, management skills and capital ; and therefore supports the Government's proposals as set out in the White Paper, "New Opportunities for the Railways".

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Insurance Companies

10.14 pm

The Parliamentary Under-Secretary of State for Corporate Affairs (Mr. Neil Hamilton) : I beg to move

That the draft Insurance Companies (Amendment No. 2) Regulations 1992, which were laid before this House on 30th November, be approved.

The regulations which I have laid before the House are intended to fulfil our obligation to implement the second Council directive on life insurance, directive 90/619/EEC, of 8 November 1990. The main purpose of the directive is to allow life insurance companies which have head offices in one member state to operate in another without having to set up a branch or agency in that state. This concept of selling insurance across member states' borders is known as the freedom-to-provide services. This freedom has existed for most non-life insurance for two years and was extended in November last year to companies providing cover for motor insurance risks. The regulations now before the House extend this freedom to life insurance, although not, for the time being at least, to long-term business falling within class VII, that is, pension fund management.

This freedom is, however, of limited effect. Only insurers of large non- life risks and life contracts which are taken out by the policyholder on his own initiative enjoy full freedom to provide services under the second directive. The directives allow the member state where the services are provided to continue to authorise the provision of other insurance into that member state. The Government did not take up this option in respect of non-life insurance provided into the United Kingdom, and do not propose doing so for life insurance. Thus we will continue to allow freedom to provide services into the United Kingdom.

The directive represents a midway stage between the first life directive, which in 1979 allowed life insurers for the first time to establish branches in other member states, and the third directives which were adopted last year and which complete the single market for insurance by introducing the single passport concept for all direct insurance. This single passport will mean that an insurer will be able to offer insurance anywhere in the European Community on the basis of a single authorisation which it receives in the state where its head office is situated. These third directives are due to be implemented by July 1994. I shall be laying measures later this year to implement the third directives. Tonight, however, we have to consider the implementation of the midway stage of the second life directive.

The directive is in two main parts. First, it amends and extends the first life directive by introducing provisions in four areas : first, rules governing the law applicable to direct life insurance contracts ; secondly, procedures for the transfer of life insurance contracts from one insurer to another ; thirdly, an extension of the supervisory authority's powers to take action against an insurer which infringes the laws of another member state ; and, fourthly, the establishment of reserve powers to enable member states to act together to obtain effective access to non-EC markets.

Dr. Norman A. Godman (Greenock and Port Glasgow) : Can the Minister give an assurance that he is satisfied as to the measures of protection for individual policyholders contained in the regulations?

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Mr. Hamilton : As regards contracts which are written in the United Kingdom, there is no change in the protection that applies to policyholders. As regards United Kingdom residents who wish to take advantage of the opportunity to purchase contracts of insurance from other member states in the Community, they will be protected by such arrangements as are in force for those member states.

I reiterate that this is a halfway stage between the first and third directives. We are not going to be in a situation where there is complete freedom to provide services throughout the Community which we shall eventually enjoy, and to that extent the need to be authorised as an insurer in other member states will, to some extent, I suppose, provide the kind of protection which the hon. Gentleman might be envisaging.

Secondly, the directive introduces freedom for life insurers to provide services. The provisions include a requirement on the insurer to notify the supervisory authorities in the member state where his head office is situated of his intention to provide services in another state, to notify the authorities in the state where the services are to be provided, and, where the insurance is to be provided from a branch established in another member state, to notify the authorities of that state also.

The option to which I referred for member states to choose to make the provision of services in their territory conditional on the grant of an official authorisation from their authorities except where the policyholder takes the initiative to conclude a contract on a cross-border services basis includes also a power for the competent authorities in the member state where the services are provided to take action against companies which fail to comply with the laws applicable to them in that state, and if the authorities in the member state where that establishment is situated fail to do so it also provides for cooling-off rights for all individual life assurance policyholders contracting on a cross-border services basis, and the exchange of statistics on premium income receivable from services contracts.

I have placed in the Library and in the Vote Office detailed notes on the regulations. I hope that hon. Members will find those helpful to their understanding of their effect. I shall explain briefly how each regulation implements those principles, but I shall be happy to explain any point should hon. Members find that helpful.

Regulations 2 and 4 extend to long-term insurance business existing provisions in the Insurance Companies Act 1982 which were introduced by earlier regulations in respect of general insurance business. Regulation 2 extends the Secretary of State's powers of intervention, powers to withdraw a company's authorisation and powers to petition for the winding up of a company where that company has failed to comply with the laws of another member state if those laws implement the first or second life directives.

Regulation 4 extends the provisions relating to the provision of life insurance into the United Kingdom from another member state and thus fulfils one of the key purposes of the directive. Regulation 6 provides interpretation for certain phrases used in the Insurance Companies Act 1982, as amended by these regulations.

Regulation 3 implements article 6 of the directive, which lays down detailed arrangments for consultation with the authorities in other member states before approval can be given to a transfer of long-term insurance business from one authorised insurer to another. It also requires the authorities in the member state where the head

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office of the transferee company is situated to certify that the transferee will have the necessary margin of solvency after taking the transfer into account.

Regulations 5 and 9 implement the provisions of the directive which determine the law applicable to direct life insurance contracts. Regulation 5 amends the Insurance Companies Act by introducing the rules of article 4 of the directive and the Rome convention. Regulation 9 clarifies the relationship between article 4 and the Rome convention on the law applicable to contractual obligations. Regulation 7 limits the notification requirements on EC insurers providing insurance into the United Kingdom, if that insurance is investment business within the definition in the Financial Services Act 1986. The FSA requires such insurers to notify the Securities and Investments Board of its intention to provide such services into the United Kingdom. However, all EC insurers providing any sort of life insurance services into the United Kingdom are required by the Insurance Companies Act to notify the Secretary of State. That regulation allows such insurers to be deemed to have complied with the FSA by submitting a single notification to the Secretary of State, who will in turn forward such notification to the SIB.

Regulation 8 completes the implementation of article 9 of the directive and article 4 of the motor services directive, which is directive 90/618/EEC, which for the most part were implemented by the Insurance Companies (Amendment) Regulations 1992, in the consideration of which I had the advantage of the presence of the hon. Member for Middlesbrough (Mr. Bell) on 19 November last year. That regulation ensures that the Secretary of State's or the Treasury's powers to take action under section 183 of the Financial Services Act against an insurer which is connected with a non-EEC country cannot be exercised in situations where the Council or Commission may issue a direction under the directives. In the view of the Government, the powers of the Council and Commission are exclusive. A similar provision in respect of banking was made last month in the Banking Co-ordination (Second Council Directive) Regulations 1992.

Regulations 10 and 11 introduce a statistical requirement on life insurers to provide details of premium income receivable from their services business broken down into each class of business in each member state in which the services have been provided. Regulation 11 limits the provision of statistics to cover only that business provided from the time the regulations come into force--that is, after 20 May this year--thus ensuring that the requirement is not retrospective.

The schedule to the regulations provides the form in which this information should be supplied.

These regulations do not implement the cooling-off provisions of article 15, to which I referred earlier. This article was amended by article 30 of the third life directive, which was adopted on 10 November last year. I intend, in due course--shortly, I hope--to lay separate regulations to implement the cancellation provisions of both directives. These regulations would come into force on the same day--20 May--as the regulations we are discussing now.

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