UK - Equitable Life Assurance Society was the "author of its own misfortunes", a report by Lord Penrose said.
The report into the near collapse of the mutual insurer found that “principally, the society was the author of its own misfortunes. Regulatory failures were secondary factors.”
Equitable’s one million policyholders will not receive any government compensation.
Ruth Kelly, the financial secretary said that the report described a culture of “manipulation and concealment” on the part of some of the company’s senior management that led to the society’s weakening.
Lord Penrose was severely critical of the society’s board which he said failed to get “fully to grips” with the financial situation faced by the society while the non-executive directors were “ill-equipped”, “ill-prepared”, and “incompetent.”
Roy Ranson, chief executive in 1991-97 was particularly criticised for failing to inform the board about several key management decisions and inherent business risks involved in the management of Equitable.
The report also found that the system of regulation which handled Equitable with a “light touch” was “inappropriate” and had “failed policyholders.”
Lord Penrose said that Department of Trade and Industry which regulated the society until 1998 did not have sufficient understanding of how to measure the solvency of a company like Equitable. The Government’s Actuary Department was insufficiently tough on the society, failing to demand adequate disclosure from the management.
There was a lack of co-ordination between the various regulators and the reactive regulatory system in place at the time was not updated to take into account developments in the industry, the report said.
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