This document contains the following information: The prudential regulation of Equitable Life 4th report 2002 to 2003 (Part 1) overview and summary of findings.
The Parliamentary Ombudsman received a complaint that the Financial Services Authority (FSA) had failed to take appropriate regulatory action which would have ensured that existing and potential policyholders were able to make fully informed decisions when purchasing policies or annuities form Equitable Life Assurance Society (Equitable).
The Ombudsman’s main finding is that there is no evidence to suggest that FSA failed to take appropriate action during the period under investigation (1999-2000). The role of the regulator (FSA) is to identify problems and issues and it should only intervene formally if a company breaches the statutory requirements.
The financial ‘weakness’ of Equitable was not itself a reason for the regulator to intervene, because this was very well-known to policyholders at that time (due to press coverage and Equitable’s publicity and marketing strategy).
FSA kept the financial solvency of Equitable, and Equitable’s use of reinsurance, under constant review. With regard to Equitable’s differential terminal bonus policy, FSA had rightly judged that it should await the result of Equitable’s test case in the courts. After the House of Lords ruling (July 2000), which was critical of Equitable, FSA believed that maintaining the value of Equitable was in the best interests of current policyholders, and that closing Equitable to new business would damage its value and probably eliminate the prospects of a sale.
This paper was laid before Parliament in response to a legislative requirement or as a Return to an Address and was ordered to be printed by the House of Commons.