EQUITABLE LIFE MEMBERS
Guernsey Branch Status
|Letter from Guernsey Financial Services Commission - 8 August 2001|
EQUITABLE LIFE ASSURANCE SOCIETY – GUERNSEY BRANCH
As most people are aware Equitable Life ceased to write business in December last year. This stemmed from a combination of factors including the generous terms of its Guaranteed Annuity Rates (GAR) contracts. The company has stated that it is not insolvent but some restructuring of the investments in the with-profits fund has been necessary to maintain the required margins of solvency.
1990, Equitable has operated through a branch operation in Guernsey,
managed by Bacon & Woodrow, which has written business locally and
internationally. The regulatory arrangements are that being a branch
operation of a UK insurer, prudential supervision, including solvency, is
the responsibility of the home regulator, the Financial Services Authority
(FSA) and market conduct is overseen by the Commission. In addition,
Guernsey’s policyholder protection scheme does not extend to branch
operations of UK insurers.
The Commission regularly reviews policyholder protection
arrangements for insurance companies. At the last review the Commission
agreed with their actuarial advisers that the small size of the industry
in relation to the high value of the funds of some of the companies would
have made a retrospective levy scheme, similar to the one that operates in
the UK, unworkable.
is some uncertainty surrounding the application of the UK Policyholders
Protection Act. However, the Commission understands that should Equitable
become insolvent the UK Policyholders Protection Act will cover local
policyholders, although we have been unable to get clarification from the
Policyholders Protection Board, who will not confirm the position until
such time as they are actually required to compensate policyholders.
position appears to be different for international policyholders and we
understand that the policy literature for international Equitable branch
policyholders has always stated that the Policyholders Protection Act does
recent Warren opinion suggested that there was potential for the
differential treatment of international policyholders and the Commission
contacted Equitable following publication of the opinion. It is our
understanding that although in theory it might have been possible for the
international business to be ringfenced, as a matter of practice it has
been written into the single with-profits fund along with the UK business.
There is the question as to whether ringfencing the Guernsey business
would, in any event, survive an insolvency. There does not appear to be
any obvious basis on which the international business could be ringfenced
we cannot give specific advice as the circumstances of individual
policyholders will differ, we would recommend that independent financial
advice should be taken from an appropriate adviser before any decisions
are made. In particular the position for with-profits policyholders is
complex and you should ensure that you understand how your adviser is paid
and if a switch is proposed how much of your fund will be paid to the
a Guernsey branch policyholder wish to make a complaint against Equitable
they can write to the Commission. However, the Commission does not act as
an ombudsman or arbitrator but will seek to ensure that all complaints are
dealt with at an appropriate level within Equitable. Legislation is
currently being drafted to enable the establishment of an ombudsman scheme
in the Bailiwick.
situation surrounding the issues is complex but we would like to reassure
all Guernsey branch policyholders that their interests are foremost in the
Commission’s investigations and ongoing discussions with all relevant
Commission is in the process of appointing a leading London lawyer to look
at issues involving the interests of the Guernsey branch policyholders.
Director of Insurance
Tel: (44 1481) 712801
Fax: (44 1481) 712010
9 August 2001