UK - The Treasury has ordered a wide-ranging review of the actuarial profession following Lord Penrose's inquiry into the near-collapse of Equitable Life.
The review – by outgoing chairman of the Competition Commission Sir Derek Morris – will identify the regulatory framework needed to promote “transparency in the professional conduct of actuaries”.
It will begin on May 1 and a report will be published in Spring 2005.The Penrose Report cited failings by Equitable Life’s senior management, three government departments and the regulatory system as the roots of the mutual’s near-collapse.
The Government Actuary’s Department, the department for trade and industry and the Treasury were all accused of failing to anticipate the mutual’s perilous financial state. GAD, in particular, was lambasted over its standards of scrutiny.
Penrose – cautious not to breach his mandate and identify those parties which should seek redress – said: “Principally, the society was the author of its own misfortunes. Regulatory system failures were secondary factors.”But Equitable’s autocratic chief Roy Ranson received a stinging attack.
Penrose listed a series of Ranson’s failures to communicate vital financial information to the board while Penrose described the non-executives as “ill-equipped”, ill-prepared” and “incompetent”.
The Financial Services Authority – which assumed a prudential regulatory role in January 1999 – also shouldered some blame. Experts now say the case for the society’s 750,000 policyholders over compensation is remote.
Hargreaves Lansdown head of pensions research Tom McPhail said: “To demand compensation on the strength of this is like suing a political party for the failures of democracy.”
Former Gartmore chief Paul Myners will lead a review into the corporate governance arrangements applicable to mutual life offices.
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