EQUITABLE LIFE MEMBERS
Letter from an International member in New Zealand to GFSC in response to their press release last week
EQUITABLE LIFE ASSURANCE SOCIETY
you for your e-mail addressed to Mr Neville, with regard to the above.
I have been asked to respond on Mr Neville’s behalf.
review of your e-mail I would like to make the following comments.
1990, ELAS has operated through a branch operation in Guernsey, managed
by Bacon & Woodrow, which has written business locally and
Guernsey is not a subsidiary as stated in your e-mail.
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)
in the UK and market conduct is supervised by the Commission.
It is not an uncommon situation for branch operations to operate
in this way.
Commission deals with any misselling complaints, however, the Commission
does not have the power to act as an ombudsman or arbitrator where
complaints arise but will ensure that they are dealt with at a senior
respect to the ELAS situation, I confirm that the Commission has been in
continuing discussions with both ELAS and the FSA in the UK since the
is the Commission’s understanding that there is no ringfencing and all
of the International funds are invested in the UK.
are following the issues raised in the Warren Report and believe that
ELAS has asked Nicholas Warren QC to undertake a further review of the
issues raised in his report. We
are currently awaiting the completion of that review.
can confirm that to the best of the Commission’s knowledge, no GARs
were issued by ELAS Guernsey.
There 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 the
policy documents for international Equitable branch policyholders have
always stated that the UK Policyholder Protection Act does not apply.
are incorrect in assuming that there is no policyholder protection in
Guernsey. All Guernsey
international life insurance companies are required to have policyholder
protection arrangements in place, whereby the companies are required to
maintain a minimum of 90% of assets, representing liabilities to
policyholders, in trust for the benefit of the policyholders.
Guernsey insurance companies are also required to maintain a
minimum level of solvency, which is monitored on a regular basis.
ELAS Guernsey is a branch of an UK operation, it falls outside these
policyholder arrangements. As
with all branches, the Commission monitors the companies in respect of
market conduct; solvency being the responsibility of the FSA in the UK.
copy of your complaint has been forwarded to Equitable for their
comments and I will revert in due course.
rest assured that the Commission is acting in the best interests of the
Director of Insurance
Thank you for your email of 11 August.
In response to your query about Bacon & Woodrow, they were not involved in writing business for the Equitable Life Assurance Society. Bacon & Woodrow act as the General Representative for Equitable in Guernsey. Their responsibilities include submitting the annual insurance return for a company and depositing any accounts, reports and documents requested by the Commission.
The salespeople who provided advice and sold the investment plans would not have been employees of Bacon & Woodrow.
Re: Complaint involving Equitable Life Assurance Society (ELAS)
understand how frustrating this situation must be for you and the
Commission is in the process of appointing a London law firm to provide
opinions on the situation for the international policyholders but the
issues surrounding the situation are very complex. ELAS conducted business
in Guernsey through a branch operation which is not an uncommon situation
in many jurisdictions around the world.
would draw your attention to the press release on the Commission’s
website. We are currently in the process of drafting a notice containing
are one or two points from your email that we would like to provide
further clarification. The Guernsey Government does not advertise through
the expatriate financial press as a matter of policy.
Commission has acted promptly and since the situation arose we have been
in communication with ELAS and the FSA and have been trying to seek
clarification regarding the situation of the international policyholders.
refer to seized funds. There is no such thing; all of the Guernsey branch
business is written into the UK single with-profits fund, which is why the
ring-fencing issue is so, complicated.
do not understand the point about Bacon & Woodrow’s involvement
negating the protection of the GFSC and would ask that you clarify this
we have already mentioned in our press release, the FSA is responsible for
the prudential regulation of ELAS including solvency and the Commission
oversees market conduct which would include such matters as mis-selling.
In a situation where a firm operates through a branch operation the lead
regulator is the home regulator and the powers of the host regulator only
extend to the market conduct activities. This is a common way for
companies to operate.
ELAS first established a presence in Guernsey they were exempt from
registration under the Insurance Law. The exemption was removed in 1998.
As branch operations do not fall within Guernsey’s policyholder
protection arrangements the Commission required ELAS to state on their
policy literature what the situation was with respect to the UK
Policyholders Protection Act and based on the information provided to the
Commission the literature does in fact state this.
stated the Commission has been in discussions with the FSA and Equitable
and it is correct to state that we do not have Ombudsman or arbitration
powers under our laws. We do try to ensure that complaints are dealt with
at an appropriate level but we have no rights of arbitration between
parties. Legislation to introduce an Ombudsman scheme is currently being
Commission’s role can be summarised as follows: We have general powers
of supervision and development, including responsibility for the
prevention of economic crime. We also have statutory powers to enforce
compliance with the laws regulating the conduct of financial business in
respect to your final paragraph as mentioned it is not possible to require
funds to be returned to Guernsey as the funds have always been deposited
in the UK single with-profits fund.
you have any further questions please do not hesitate to come back to me.