UK - Angry Equitable Life members have blamed directors, the department for trade and industry and the Financial Services Authority for the mutual's collapse.
The Equitable Members Action Group apportioned the blame in its “alternative Penrose Report” which it put out following further delays over publication of the official document.
EMAG fears the report by Lord Penrose – who was commissioned by the Treasury in August 2001 to look into the circumstances surrounding the collapse of the life office – may exclude “key details” once government lawyers complete their compliance review.
EMAG general secretary Paul Braithwaite said the government needed to own up to a decade of blatant regulatory failures and offer policyholders compensation.
He said: “Hundreds of thousands of policyholders have borne a £3bn bill which could have been addressed by the regulators who have been asleep at the wheel.”
The policyholders’ action group cites five key areas for Equitable Life’s demise in its joint report with accountants Burgess Hodgson. The report says:
- No provision was made for meeting its guaranteed annuity option commitments. And directors passed risk onto the next generation of policyholders without their knowledge.
- Directors allowed the “black hole” to reach over £1bn, with regulators failing to notice the deficit until 1998.
- The House of Lords’ ruling ordered the beleaguered insurer to make a £1.6bn payment to policyholders, which it could not afford.
- Equitable Life kept the scale of its “black hole” under wraps, making no attempted provision for meeting its guaranteed annuity commitments.
- The FSA, DTI and latterly the Treasury all failed to acknowledge the full scale of the insurer’s dire underfunding, and after their belated realisation failed to adequately address the situation.
Burgess Hodgson’s Colin Slater – the report’s author – said: “Watchdogs stood by for years while Equitable was handing out bonuses without the assets to back it up.
“The government was quite happy to accept future profits as a provision and ignore the truth.”
Slater added: “I think we are entitled to ask what on earth regulators were doing.”
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