JOURNAL OF THE INSTITUTE OF ACTUARIES AND ASSURANCE MAGAZINE. The Life Assurance Companies Act, 1870. AFTER much discussion this Act has at last been passed, requiring all Life Assurance Companies doing business in the United Kingdom to make annual returns in a fixed form of their receipts and expenditure, assets and liabilities, and periodically to make such further detailed returns as will admit of the liabilities of each Company under its contracts being very approximately estimated. The Act is not in all respects what we could have desired, but we anticipate that it will produce on the whole very beneficial effects upon the business of Life Insurance. So far as it extends to promote greater publicity of accounts, its operation will, we believe, be one of unmixed good; and if the returns required to be made by Companies may appear to some persons needlessly minute, still we believe we may say that the Companies will cheerfully comply with the Act, being satisfied that whatever increases public confidence must result advantageously for the Companies themselves. That there have been great evils in the state of Life Assurance business, is admitted on all hands; and the Act seems well adapted to cure those evils. It will no longer be possible for a Company that is hopelessly insolvent to claim the public confidence and obtain large amounts of new business, thus deferring the evil day, VOL. XVI. B but only with the result of largely increasing the magnitude of the loss caused by its failure, and the number of persons injured thereby; and it will be no longer possible for the managers of an unsuccessful Company to dispose of its business to an insolvent Company, receiving themselves a handsome bonus for the transaction. Nor is it matter for regret that the mystery with which many flourishing Companies have enveloped their affairs, will now be dissipated. Companies that ask the public to place the confidence in them that is implied in entering into a lifelong contract for the benefit of wife and children, should not be slow in proving themselves worthy of that confidence. There should be nothing in the conduct of a Life Insurance Company that the managers should not be prepared, if necessary, to proclaim to all the world and justify. In future, when an actuary is asked his opinion of the solvency of an Office, he will no longer be compelled in many cases to say that he knows nothing of it for certain, and can give no information except from general repute. He will have materials at command, from which to form his own estimate of the solvency and stability of any Office in reference to which he may be consulted; and the opinions thus formed on trustworthy materials will be gradually diffused through the length and breadth of the country. The inevitable result must be that public confidence and support will be rapidly withdrawn from those Offices-few in number, we trust they will be found-that do not show themselves worthy of that confidence and support. The only provision which seems to us open to serious objection is that contained in Section 3:-that every new Company shall deposit £20,000 with the Accountant-General of the Court of Chancery. This is quite contrary to the principles of free trade which have of late years been so fully accepted by the Legislature, and there seems no good reason why the business of Life Assurance and Granting of Annuities should be restricted to persons or Companies who are prepared to make the above deposit. In particular, the provision seems likely to interfere materially with the future establishment of Mutual Insurance Companies. also, the Act will prevent the formation of small local Societies for Life and Fire Insurance, and for the mutual guarantee of Survivorship Annuities, such as were at one time very common. It is true that these Societies have almost always proved unsuccessful, but that does not seem a sufficient reason for forbidding them in future ; and in no other department of trade has the Legislature thought it necessary to restrain the public from investing their monies in ventures likely to prove unsuccessful. In a word, the requiring So of this deposit is a measure of protection to the existing Assurance Companies, and must therefore, we are satisfied, be prejudicial to the interests of the public. SECTION 4. Several of the provisions of the Act have our unqualified approval. It is undoubtedly only right that the Life Assurance Fund of a Company transacting other business besides that of Life Assurance, should not be liable to pay the losses under fire or marine policies; and this no doubt will ultimately be the effect of the 4th Section, although it is not very clearly expressed. SECTION 7 provides that an investigation into the financial condition of every Life Assurance Company shall be periodically made "by an actuary"; but there is no interpretation contained in the Act as to who is to be considered an actuary. This we hope will be supplied at some future time, and we trust the day is not far distant when the profession will be fully recognized and have a legal standing. It is a great step in the right direction that the existence of professional actuaries is recognized by the Law; and the next step, that of preventing incompetent persons from assuming the title, surely cannot be long delayed. The provisions of SECTIONS 12 and 13, that a list of the names and addresses of the shareholders and a printed copy of the deed of settlement, shall be furnished to every shareholder or policyholder requiring them, are extremely proper. SECTIONS 14, 15 relate to amalgamations, and are intended to prevent any amalgamations of Insurance Companies being carried out except with the authority of the Court of Chancery. Experience only will show whether they will be efficacious for that purpose. It is notorious that most of the amalgamations hitherto effected have been carried out without proper powers, and might have been prevented if called in question within a sufficient time. There is, however, no doubt that the Act will place difficulties in the way those legitimate amalgamations which are beneficial to all parties interested. of SECTION 21 relates to the winding up of an insolvent Insurance Company. This is a question of extreme difficulty. How is the Court to be satisfied that a Life Insurance Company is insolvent, taking into account its liabilities under policies and other contracts? What rule is the Court to adopt for estimating that liability? And in the very probable case of the Court having the opinións of several skilled actuaries laid before it, some saying that in their opinion the Company is insolvent, and others that it is solvent, how is the Court to decide between them? Assuming this difficulty to be got over, SECTION 22 is admirable. There can be no doubt that Life Assurance Companies proved to be insolvent should not be wound up as other Companies, the contracts being considered as put an end to, and the policyholders admitted to prove for damages in consequence of the breach of contract;-but that the justice of the case requires that the contracts should be considered as continuing in force for a reduced amount. The Act is as follows: Short title. Interpretation of terms. An Act to amend the law relating to Life Assurance Com- 1. This Act may be cited as "The Life Assurance Companies Act, 1870." 2. In this Act The term " company" means any person or persons, corporate or unincorporate, not being registered under the Acts relating to friendly societies, who issue or are liable under policies of assurance upon human life within the United Kingdom, or who grant annuities upon human life within the United Kingdom: The term "chairman" means the person for the time being presiding over the court or board of directors of the company: The term "policy holder" means the person who for the time being is the legal holder of the policy for securing the life assurance, endowment, annuity, or other contract with the company: The term "financial year" means each period of twelve months at the end of which the balance of the accounts of the company is struck, or if no such balance is struck, then each period of twelve months ending with the thirtyfirst day of December: The term "Court" means, in the case of a company regis- The term "registrar" means the Registrar of Joint Stock 3. Every company established after the passing of this Act Deposit. within the United Kingdom, and every company established or to be established out of the United Kingdom which shall after the passing of this Act commence to carry on the business of life assurance within the United Kingdom, shall be required to deposit the sum of twenty thousand pounds with the Accountant General of the Court of Chancery, to be invested by him in one of the securities usually accepted by the Court for the investment of funds placed from time to time under its administration, the company electing the particular security and receiving the income therefrom, and the registrar shall not issue a certificate of incorporation unless such deposit shall have been made, and the Accountant General shall return such deposit to the company so soon as its life assurance fund accumulated out of the premiums shall have amounted to forty thousand pounds. separate. 4. In the case of a company established after the passing of Life funds this Act transacting other business besides that of life assurance, a separate account shall be kept of all receipts in respect of the life assurance and annuity contracts of the company, and the said receipts shall be carried to and form a separate fund to be called the life assurance fund of the company, and such fund shall be as absolutely the security of the life policy and annuity holders as though it belonged to a company carrying on no other business than that of life assurance, and shall not be liable for any contracts of the company for which it would not have been liable had the business of the company been only that of life assurance; and in respect to all existing companies, the exemption of the life assurance fund from liability for other obligations than to its life policy holders shall have reference only to the contracts entered into after the passing of this Act, unless by the constitution of the company such exemption already exists: Provided always, that this section shall not apply to any contracts made by any existing company by the terms of whose deed of settlement the whole of the profits of all the business are paid exclusively to the life policy holders, and on the face of which contracts the liability of the assured distinctly appears. 5. From and after the passing of this Act every company Statements to shall, at the expiration of each financial year of such company, prepare a statement of its revenue account for such year, and of its balance sheet at the close of such year, in the forms respectively contained in the first and second schedules to this Act. 6. Every company which, concurrently with the granting of policies of assurance or annuities on human life, transacts any other kind of assurance or other business shall, at the expiration of each such financial year as aforesaid, prepare statements of its revenue account for such year, and of its balance sheet at the close of such year, in the forms respectively contained in the third and fourth schedules of this Act. be made by companies. Statements by company doing business. other than life report and 7. Every company shall, once in every five years if estab- Actuarial lished after the passing of this Act, and once every ten years abstract. if established before the passing of this Act, or at such shorter |