Equitable Life’s ongoing financial problems are causing political turmoil in the U.K., after a leaked memo revealed that the Treasury Department was concerned about its solvency over two years ago.
Equitable was under pressure to find a buyer after an unfavorable court judgment upheld policyholder rights to receive high lump sum payments on certain guaranteed annuity policies. It failed to do so, and, although continuing operations, and technically solvent, has stopped accepting new business.
Treasury Minister Melanie Johnson, while ruling out government support for policy holders, indicated that the Financial Service Authority, the U.K’s principal watchdog agency for financial services, including insurance, would begin an investigation soon to determine the cause of the crisis and perhaps answer the question as to why it was allowed to develop for so long a time.
One possible reason given is Equitable’s need to find a buyer. Any earlier investigation would have probably foreclosed that possibility.
Most analysts agree that the situation was badly handled by Equitable management, and have suggested that an outside team needs to be brought in straighten out the mess, while there’s still time.
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