FIELDING (Minister of Finance) moved for leave to introduce Bill (No. 97) respecting Insurance. He said: Mr., Speaker: This Bill is to a very large extent the Bill which was presented to the House last session and held over for further consideration. It is not, however, the same in all respects. The Bill of last year was the subject of a protracted hearing and inquiry before the committee on Banking and Commerce, during which many suggestions were offered by way of amendment. We have had the benefit of that inquiry, and the benefit of the further study which has been had of the Bill in consequence of the delay; and with the better light which has come to us we have endeavoured to make some improvements in the Bill. I shall call the attention of the House to the points in which, the Bill differs materially from that of last year. We do not make any change in the existing law with respect to the assessment insurance companies. A proposal in relation to these institutions was made in the Bill of last year; but even if we had gone on with that Bill, that proposal, as was stated; at the time, would have been withdrawn.
The principal companies engaged in that line of business represented to us that they recognized the necessity for strengthening their position, that they were going about it in their own way and desired to be left to themselves for that purpose. We are aware that efforts are being made in that direction and so we do not propose in this Bill to make any change in the existing law with respect to these organizations. Probably the question of investments is the one which engaged the most attention before the committee last year We have made some changes with respect to the provisions on that subject to which I shall invite the attention of the House. Section 60 of the new Bill will read:
Any life insurance company which derives its corporate powers, or any of them, from an Act of the parliament of Canada, or which is within the legislative power of the parliament of Canada, may invest its funds, or any portion thereof, in the purchase of-
(a) The debentures, bonds, stocks, or other securities of or guaranteed by the government of the Dominion of Canada, or of or guaranteed by the government of the United Kingdom, or of any colony or dependency thereof, or of or guaranteed by the government of any foreign country, or state forming a portion of such foreign country, wherein the company carries on or is about to carry on business, provided the Treasury Board has signified its approval of such securities, or of any municipal or school corporation in Canada, or elsewhere where the company is carrying on business.
That is substantially the same as in the Bill of last year.
Subsection (b) 1 includes among the securities in which a company may invest
The bonds of any company which bonds are secured by a mortgage to trustees or a trust corporation, or otherwise, upon real estate or other assets of such company.
The former Bill required that these bonds should be outstanding for at least five years. In the present Bill we have dropped the time condition; if the bonds are secured by mortgage they are deemed to be good and may be used as a field for investment. The former Bill restricted these bonds to the bonds of a corporation incorporated in a country in which the insurance company v as carrying on business. We have, after the discussion which has taken place, removed that restriction. Subsection 2 of subsection (b) reads:
The debentures or other evidences of indebtedness of any Company, which has been doing business for a term of not less than five years prior to the date of such investments, provided default shall not have been made by such company in the interest payments upon its debentures or other evidences of indebtedness within the said period of five years prior to such investment.
In the former Bill it was required that such debentures should be of seven years' standing. In the present Bill we apply the time limit not to the debentures but to the standing of the company which issues the debentures. If a company is of five years' standing and has made no default it is presumed that its debentures may be treated as good.
Subsection 3 of subsection (b) reads:
The preferred or guaranteed stocks of any company which has paid regular dividends upon such stocks or upon its common stocks for not less than five years preceding the purchase of such preferred or guaranteed stocks.
Last year's Bill provided that such stocks should have paid 4 per cent for seven years. The present year drops the 4 per cent condition and provides that the company shall have paid regular dividends for five years on this class of stock but does not specify the rate. The argument is that this is a high class of stock which may in some instances not pay as much as 4 per cent, and that it is not wise to insist upon the 4 per cent rate.
Subsection 4 of subsection (b) reads:
The common stocks of any such company upon which regular dividends of at least 4 per cent have been paid for the seven years next preceding the purchase of such stocks: Provided that not more than 20 per cent of the common stocks and not more than 20 per cent of the total issue of the stocks of any company shall be purchased by any such life insurance company, and that no company shall be permitted to invest in its own shares
or in the shares of another life insurance company.
Last year's Bill provided that the common stock should have paid at least five per cent dividends for ten years. The present Bill recognizes the stock as good if it has paid four per cent for seven years.
There is a proviso here as to the percentage of money which may be invested in the securities of any one company. The object of that was to provide that the company should not create a subsidiary company and obtain a controlling interest in it. It was found, however, that the words of the clause seemed to be too broad, and we have now amended it. Last year's Bill limited the investment to twenty per cent of all the stocks or securities of the company. In the present Bill we are distinguishing between the stocks and bonds and our proviso is that the investment may not exceed twenty per cent of the sto'cks of any company, but we leave the company free to invest in the bonds if they are deemed to be good security.
Subsections (c) and (d) of this clause recognize ground rents or mortgages on real estate, and life and endowment policies as proper subjects for investment, but these are not changes and it is not necessary to say anything concerning them.
A question arose as to what action should be taken respecting any investments of a company in securities which might not come within the new law. Provision was made that in the case of securities not recognized by the new Bill the securities should be disposed of within a certain time. We have changed that to provide that where the investments were made in securities which at the time of their purchase were legal and proper the company shall be free to dispose of them at such time as it may find most convenient. In the case of securities which, at the time of their purchase were not strictly within the terms of the old Insurance Act-this applies in one or two instances-provision is made that such securities shall be disposed of within a period of five years.
A question which has received great attention in the discussion of insurance matters is the expenses of management. In the last Bill provision was made for a limitation of the expense on new business, and at one stage it seemed that such a rovision was called for, if not by what ad occurred in Canada by the developments in other countries. In the investigations abroad great importance was attached to this question but when it came to be discussed with insurance men here before the committee it was urged that it would be exceedingly difficult to apply a limitation of that kind without interfering with the volume of insurance. It was held that the proposed limitation would so hamper the insurance agents that they