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With this it will be convenient to discuss the following:
Amendment 38, in clause 13, page 7, line 28, after ‘insurers’, insert ‘and reinsurers’.
Amendment 40, in clause 13, page 8, line 5, at end add
“‘reinsurer” means a person who, at any time during the reference period, was a person offering reinsurance to active insurers or their reinsurers in respect of employers’ liability insurance and includes retrocessionaires.’.
Amendment 41, in clause 14, page 8, line 7, after ‘insurer’, insert ‘or reinsurer’.
Amendment 42, in clause 14, page 8, line 10, after ‘insurer’, insert ‘or reinsurer’.
Amendment 43, in clause 14, page 8, line 12, after ‘insurer’, insert ‘or reinsurer’.
Amendment 44, in clause 14, page 8, line 13, after ‘insurer’, insert ‘or reinsurer’.
Amendment 45, in clause 14, page 8, line 14, after ‘insurer’, insert ‘or reinsurer’.
Amendment 46, in clause 14, page 8, line 18, after subsection (4) add—
‘(5) In this section—
(a) “active insurer” means a person who, at any time during the reference period, was an authorised insurer within the meaning of the compulsory insurance legislation, and
(b) “reinsurer” means a person who, at any time during the reference period, was a person offering reinsurance to active insurers or their reinsurers in respect of employers’ liability insurance and includes retrocessionaires.’.
During this morning’s sitting, the last amendment, which I moved and in respect of which the will of the Committee was tested, was one that I said mattered. In a sense, these amendments are not probing amendments but are similar to the one this morning, because they would give the Minister a way out of the difficulties that he has faced in Committee and on Second Reading in relation to some points made regarding the deficiencies in the proposed scheme.
The problem with the proposed scheme, which has been identified by all parties, is that there is no moral case at all, as I think every member of the Committee agrees, for anyone who suffers from mesothelioma to receive anything other than 100% of the compensation that they would receive if they could trace and successfully pursue either an employer or that employer’s compulsory liability insurers. Yet the deal that the Minister has alluded to, which has been done between the Government and their predecessor under whom the negotiations with the insurance industry began, is that to allow the insurance industry to swallow the costs of the scheme, any payments that fall due under the scheme must be accommodated within a cap of 3% of the gross written premium that the industry manages every year.
Although I may or may not agree with that cap and although I may or may not agree with the ability of the insurance industry to swallow more without passing on the cost to business, I am proceeding on the assumption that that 3% cap is what we have to live with because that is the deal that has been done. Yet if more money were available, we could fund 100% compensation. If more money were available, we could ensure that there was a research levy, as the right hon. Member for Wythenshawe and Sale East urged upon the Committee. If more money were available, we could extend the scheme so that, as other Members who spoke on Second Reading suggested, it extended to those who are not at present caught by it. They are the partners or spouses who were exposed to fibrous carcinogens that have caused mesothelioma: people came back to their houses and effectively gave the disease to their spouse or partner. The scheme could then cope with children who were not employed by anybody, but who will sustain a diagnosis of mesothelioma because they were taught in classrooms where carcinogens were present.
The whole edifice of problems that have been identified with the scheme, welcome as it is, in not going far enough could be cured if there were another pot of money to which the Government could turn to ensure that everyone diagnosed with mesothelioma who has no other recourse could receive full compensation for the injuries that they have sustained and that will ultimately lead to their deaths. On reading the Bill in preparation for the Committee, as no doubt every other member of the Committee did, I not unnaturally wondered whether another such pot of money could be tapped on the basis of the rationale that underlies the Bill.
Let us be clear what that rationale is. The insurers who will essentially pay for the scheme are—in so far as they are not new entrants, and many are not—insurance companies that received over the years premiums from employers in relation to risks, which have now eventuated, that those employers would negligently have occasioned an exposure to asbestos that has caused mesothelioma in their employees. That is something that those direct insurers received payment for, which, as the hon. Member for Stretford and Urmston indicated, is something that they would have reserved for at the time. They certainly should have done so. That is why they are being asked to contribute to the scheme.
Behind those insurers—this appears to have eluded both this and the previous Government—sits another group of insurers: insurers of insurers. They have also received significant premiums and are being asked to contribute precisely nothing to this or any other scheme where the person who suffers from mesothelioma has no recourse to anyone else. Those individuals are in the reinsurance market, which operates in this jurisdiction and in every other jurisdiction in the developed world.
Perhaps, Mr Howarth, I may be permitted a brief excursion by way of education. An insurer does not hold on to all the risks that he collects together. That is not how the market functions. An insurer either parcels out some of those risks by way of quota share reinsurance, which effectively gives the reinsurer part of the original risk, or he might effect some form of stop-loss policy, excess of loss policy or other type of policy that will stop his losses breaching a certain amount. The purpose of the reinsurance industry is to ensure the survival of the insurance industry during various catastrophes and to smooth out results and to create capacity in the direct market.
Be that as it may, whatever that purpose is, reinsurers operating today have received significant amounts, perhaps as much as 20%—perhaps even more—of the premiums paid to direct insurers by employers to effect compulsory insurance. They are being asked to contribute precisely nothing to this or any other scheme of last resort to make whole those who suffer from mesothelioma, who have no other route of recourse. They therefore afford, as the previous Government should have appreciated and as perhaps this Government should also have appreciated, a pocket of money that is not being tapped up, but which could be used to ensure full compensation to those who have to seek recourse from the scheme; that could be used to ensure proper research into treatments and cures for mesothelioma, as urged upon the Committee by the right hon. Member for Wythenshawe and Sale East; that could be used to extend the scope of the scheme, so that it covered those who have no other route of recourse and, for example, did nothing more than wash their husband’s overalls covered with asbestos fibres; and that could be used to ensure that children, who will in middle age and later life sustain diagnoses of mesothelioma, are properly compensated in circumstances in which they have no other recourse because they were not employed by anyone.
I simply do not know the answer to that. It might be that I am completely wrong and that there is no such pot of money. Many reinsurers are large corporations not necessarily domiciled in this jurisdiction and might therefore not be represented by the ABI. If one thinks of the Swiss Res and the Munich Res of this world, I do not believe they are listed here in the UK. They of course have a significant presence here, but I do not know whether they are represented by the ABI. However, here is a group of companies and markets worldwide, in this jurisdiction and elsewhere, that could have been asked to contribute to the scheme, because they have undoubtedly received premiums in the past that have not been used to pay claims that have eventuated; yet that has not happened.
The group of amendments, in my name and that of my hon. Friends the Members for Enfield North, for Daventry and for Eastleigh, seeks to ensure that reinsurers are asked to contribute in a way that they have not been by this or the previous Government, so that we can deal with all the problems identified in Committee and on Second Reading, and so that, as the hon. Member for Wansbeck has said a number of times, we do not lose sight of what the scheme is about, which is to ensure that full compensation is given to those who have sustained an appalling diagnosis of mesothelioma, as a result of nothing more than the fact that they went to work, and who will leave behind them relatives who are very often the claimants themselves, who have to deal not only with the death of a loved one, but with having to lose the income that that loved one brought in.
Mesothelioma is, as we all know, an appalling disease, which the Government are quite properly dealing with in the scheme of last resort; but if we are to deal with these problems, I do not see why we should not ask everybody who made money from the premiums paid by employers who can no longer be traced.
The hon. and learned Gentleman is generous in giving way. Like my right hon. Friend the Member for Newcastle upon Tyne East, I am very persuaded by what the hon. and learned Gentleman has said. Many very wealthy organisations are perhaps not represented by the ABI. Does that not give the Government the opportunity to negotiate with them to make up the 75% to 100%?
It may well do—the hon. Gentleman is perfectly right about that—but for one fact, which is that we need to get the Bill on the statute book now. We need it as quickly as possible, because there are people out there who have already had a diagnosis of mesothelioma and people whose loved ones have recently died of mesothelioma since the cut-off date. That is another thing that we could deal with if we had more money, but never mind. Those people need recompense as quickly as possible.
Although I want to hear from the Minister before I indicate whether I want to test the will of the Committee on the amendments, the position that I am urging on him is that, even if at this stage the Government cannot accept the amendments because there has been no write-round or negotiation with the reinsurance industry, this is something that his Department needs to look at. It needs to do some work on it, to work up proposals and approach those who carry this form of reinsurance and who made money out of this market and received reinsurance premiums for which they have not had to pay claims.
If necessary, the Minister will then need to conduct some other consultation and come back with another Bill, perhaps one that amends this one, to ensure, as every hon. Member wants, that under this scheme of last resort for those who are driven to it proper compensation is afforded for those who receive an appalling diagnosis of mesothelioma.
Good afternoon, Mr Howarth, it is a great pleasure to serve under your chairmanship. I rise briefly warmly to welcome and endorse the amendments proposed. I hope, like the hon. and learned Gentleman, that the Minister will be able to give a constructive and positive response to the proposal.
I will speak to the amendments in general terms. The principle behind them was put eloquently by my hon. and learned Friend. He rightly expected me to say that I could not accept the proposal now, because the process has not gone through Government structures, as former Ministers will understand, Mr Howarth.
I will move on to a more positive tone by saying that I would like to look at the proposal in more depth. I come to this with some knowledge, to which I alluded when Mr Davies was in the Chair. He understood where I was coming from in relation to the bookmaking industry. Bookmakers lay off their risk all the time. If I went in and had a £1 million bet with Ladbrokes this afternoon—it might be able to afford it, though other bookmakers might not—it will offload that risk through the system. If that company did not pay out, I could not go to the other bookmakers where that bet had been offloaded.
The principle of reinsuring based on moving the risk down the line would need to be debated and looked at more extensively. I am happy to progress discussions with reinsurers. It may perhaps seem sometimes that they are not being represented by the ABI. Many will be the same companies that we are talking about. Because of that and the complexity it would bring, my hon. and learned Friend is right that at this stage of the Bill, being so close to getting the legislation on the statute book—
Cannot the Minister just say why nobody in the other place, among officials or those advising the previous Government, thought about that point? If it is a bad point—the Minister does not appear to say it is—I would understand why nobody had thought about it. Why, when we could have given full compensation, are we having to deal with this now? I accept that we are where we are, and that it is too late. There seems to have been a catalogue of poor advice— I choose my words carefully.
I have a great deal of sympathy with my hon. and learned Friend’s point. I was, of course, not there in the difficult discussions on who would be party to the levy and who would be a party in the Bill, which the Committee has discussed extensively Committee. Those were difficult discussions about who would be party to the levy and to the legislation before the Committee. I understand that the complexity of tracing reinsure and run off is part of the issue—most hon. Members will realise that it is the biggest issue. I give a commitment that we will continue to pursue the matter and see whether we can bring more organisations to the party, but at the same time, as my hon. and learned Friend touched on his comments, I cannot at this stage of the Bill accept the amendments, simply because they would create a difficult situation. Things are not the right way around—we have not got Treasury approval and we have not even been in discussions with the reinsurers, let alone bringing them in. Given the complexity, sadly—we may disagree on this—I cannot accept the amendment.
I am grateful to the Minister for his positive indication that the Government will look at the matter. The lead amendment is in the hands of the Committee rather than in mine. For my part, on the basis of the Minister’s assurances, I will not seek to press the other amendments to a vote, and I will attempt to withdraw this one, but the Committee knows that it is not within my gift that that should necessarily occur. I beg to ask leave to withdraw amendment.
The Bill makes provision for the Secretary of State not only to impose the levy that is dealt with in clause 13, but to impose it with a view to meeting the costs of the scheme. The scheme, in essence, picks up the costs of liabilities for which those who are funding the scheme have already been paid, by way of the premiums that they have received in the past. The amendments in my name and the name of other hon. Friends therefore seek to make it clear that it is the entirety of the costs that should be picked up by the those who have received the premiums—the insurance industry—and that no part of the cost should fall on the taxpayer. I hope the Minister will therefore indicate either that that is the intention, or that he will accept the amendments.
I shall be brief. Yes, that is the intention of the Government and of the Bill. The funds are there explicitly to ensure that there is no way the levy funds can be used for anything else and that they cover the cost of the scheme. Part of the reason why there was Government investment into this and into the smoothing was to ensure that that could take place. That is the position of the Government, so I assure my hon. and learned Friend that the amendments are not required.
I will make a short speech on the clause, in particular to ask the Minister to expand on some of the issues discussed on Tuesday. On two separate occasions on that day, he helpfully gave two welcome assurances that the 3% levy on insurers would be protected. First, he told us:
“that the 3% is not going anywhere. The figure will be 3%, which is important. I hope that hon. Members have listened and understand my position and the Government’s position and will therefore not press their amendments.”
Later, he repeated the commitment:
“It is very important that the insurance companies know that the 3% is there. In Committee in the other place, Lord Freud committed to a review at the end of the smoothing period, after four years, to see exactly how things were going. There was certainly not a commitment to interfere. I will place that fact in regulations so that the Committee has confidence that a review will take place after the four-year smoothing period. At that point, we will have a much better idea of how much the levy collector is collecting. We may be able to spend that by increasing the percentage, or we may be able to do other things with it.”––[Official Report, Mesothelioma Public Bill Committee, 10 December 2013; c. 72 to 78.]
We were grateful for the Minister’s firm endorsement that the 3% levy would not be subject to any reduction, even if surplus funds were available within it.
Following that debate, I took another look at the impact assessment, particularly the most recent assessment that was published a couple of weeks ago. It states that the costs of the scheme are split between a £371 million levy on the insurance industry—the 3% levy—and £17 million of Government funding, which we discussed earlier. In fact, the industry cost of £371 million is mentioned eight times in the document and I cannot trace a different figure being discussed. However, by my calculations, a 3% levy on the gross written premium is approximately £432 million over 10 years, so will the Minister explain the £61 million difference?
As I said on Tuesday—this was the strong sentiment of all members of the Committee—ensuring that the levy remains at 3% is essential to prevent victims from losing out when insurers can comfortably accommodate that level of payment. I would be particularly concerned if the £371 million represents an under-assessment of what a 3% levy could raise. Will the Minister assure me absolutely that it would not be used as an opportunity for the industry to argue that a smaller total global figure should be protected, and that he will reaffirm that the 3% levy will be consistently applied across all insurers currently active for a minimum of 10 years, if not the 40 years volunteered by the ABI, and that any surplus money will be diverted to a fund for research, to extend the scheme or to enable more generous pay-out levels?
It is a pleasure, Mr Howarth, to serve under your chairmanship and guidance. We go back some 40 years in Labour politics and my only disappointment is that now that I know exactly where you are and the good works you are engaged in, it is far too late by several years for me to make as much use of the information as I might have done a few years ago.
Order. I am not sure whether the hon. Gentleman was trying to pay me a compliment, or making a veiled threat, but neither will have any impact on the impartiality of the Chair.
The only thing that would serve me now, Mr Howarth, would be the compliment, and of course that is what was intended. I am sure you have taken it in that spirit.
It would be wrong to leave the matters under discussion in clause 13 without referring back to the point raised by the hon. and learned Member for Sleaford and North Hykeham. I thought his intervention on the Minister about why the reinsurance point was overlooked, if it has been overlooked, was a powerful one. If it has not been overlooked and there is a good reason why those in the reinsurance part of the sector have not been embraced by the Bill, the Committee would like to hear what it is. Will the Minister, either later in our proceedings or on Report or Third Reading, explain what it is? If it is a genuine oversight and there is no policy reason why they should not be embraced by the Bill, will it be possible to put it right? Obviously, some consultation would be needed, but I do not think that, with good will on both sides, that would be impossible and we could return to it on Report.
Another matter that I found even more perplexing is the industry view. The Minister and his officials will have had discussions with the industry and, as far as we know, they have not raised the point, but one would have thought that it would be to their advantage if they could find another group of people with whom to share the costs. There may be some industry reason why they do not want to embrace reinsurance, but I do not know what it is. Can we possibly ask the Minister to ascertain what it is?
Yes. I am getting myself more into trouble the more I speak on this Committee. First, by paying utterly deserved compliments to the Chair, now by agreeing with—
I was going to say “a well-remunerated lawyer,” but perhaps we should just say a Member of the coalition Government. I agree with the hon. and learned Gentleman on that point. It would help if the Minister could satisfy the Committee or at least offer some explanation to us, and if it were possible to get such a thing before the Committee concludes its proceedings.
Yes, of course I will write to members of the Committee, but the information will be available in the Library to all Members who want to take part in the debate on Report and Third Reading. I have no inner knowledge, but I suspect that the reinsurers are going to be almost exactly the same people who were insuring in the first place. There is not an infinite amount of companies out there insuring, but we will write to them.
There seems to have been an awful lot of oversight, if we want to look at it that way, but I do not think that this was an oversight—it is the deal that was struck. I say to the shadow Minister, the hon. Member for Stretford and Urmston, that I met Lord Freud, my fellow Minister in the Department for Work and Pensions, this morning. Three per cent. is 3% and we have no intention of moving away from it. I will write to her to give her more details, but my note says that the different amount, as she quoted, will add the current assumptions about the rate of volume of payments as estimated. The assumption is of the volume and rate of business, because obviously the businesses that the people were involved in were not passing it on to businesses that are buying the compulsory premium that we will have. I will write to her and explain that in more detail as we progress.