This Order is designed apparently to bring into operation an agreement made with reference to contracts of insurance and reinsurance entered into before the war and in the early stages of the war, and made pursuant to the Treaty of Peace with Finland. It is an Order of very considerable complication. It seems to provide what is to happen to these contracts of insurance and reinsurance as the result of the intervention of the war since these contracts were made. I venture to suggest that the Minister should give some short explanation of the general framework of the Order and what it is intended to achieve.
I am glad to respond to the very reasonable request of the right hon. and learned Gentleman. This Draft Order and the next one upon the Order Paper seek the approval of Parliament for agreements which have been drafted and agreed between our insurers and the Finnish insurers in the one case and our insurers and the Italian insurers in the other. These two agreements, reached by the insurance markets, have been the subject of Inter-Government Agreements but, of course, further action is necessary, as the right hon. and learned Gentleman appreciates, in order to make them part of our own municipal law.
At the end of the Second World War, in certain of the Treaties, including the two Treaties with which we are concerned tonight with Italy and Finland, instead of setting out all the provisions governing contracts of insurance and reinsurance, provision was made that they should be the subject of separate agreements. Those separate agreements, made between the insurance markets of the respective countries, were embodied in Inter-Government Agreements, and it is in respect of two of these agreements that we seek approval tonight for making them part of our municipal law. This is to be done under the Act mentioned in these Orders. I think the right hon. and learned Gentleman would like me to tell him in a few words the main principles that these rather complicated provisions embody.
The main principle is this—and it is a principle which has been embodied in other peace statutes, both after the First World War and after the Second World War: direct contracts of insurance between an insurer and an assured are maintained but contracts of re-insurance are terminated at the beginning of the war. As the right hon. and learned Gentleman will see, the first class covers contracts between an individual and an insurer. The second class covers contracts between two insurers. Of course, if a reinsurance contract is cancelled or terminated, the original insurer may find himself answerable for larger risks than would ordinarily be prudent, but he can generally effect another re-insurance. An individual, on the other hand, if his contract of insurance were terminated and broken, might be subject to hardship or loss.
That is the basic idea behind the decision to preserve the latter class, allowing what is the common law and the ordinary statute law to operate in the former class. The details have been worked out between the very expert gentlemen who represent our great insurance interests and the insurers in the two countries concerned. The House will welcome the fact that that agreement has been reached. The complete agreement which has been reached has already been subject to inter-Governmental agreement and the sole purpose of these two Orders is to make the agreements reached good English law and part of our own municipal law.