Penrose and Kelly Evidence: Minister's Silence on Compensation Unacceptable

4.10.00pm GMT Tue 16th Mar 2004

Norman Lamb MP, Liberal Democrat member of the Treasury Select Committee, responding to the appearances by Ruth Kelly and Lord Penrose at the Committee today, said: "Lord Penrose undermined Ruth Kelly's statement to the House last week that by reiterating that compensation to policyholders was not part of his remit."

"The Minister continued silence on the process of finding redress for policy holders of Equitable Life is entirely unacceptable. Her recommendation that policyholders should sue Equitable is effectively asking them to sue themselves, and could lead to the collapse of the company."

"The Government must address the criticisms that Lord Penrose made of government regulation, and a process must be created whereby the specific issue of compensation as a result of regulatory failure can be examined."

ENDS

Notes

Lord Penrose's report noted that the regulatory functions of the government failed in key areas:

• The regulatory regime did not keep pace with developments in the financial industry, basing its findings exclusively in regulatory solvency.

• No consistent attempts were made by the regulator to see how the reasonable expectations of policy holders would effect the liabilities of Equitable life.

• There was an over reliance in the actuary used by the Government who during the critical period from 1991-1997 was also the Chief executive of the company and thus had a conflict of interest.

• It failed to notice that many of the measures used to bolster Equitable's solvency was based on the assumption of future surpluses.

• There was a general failure to follow up areas of concern "Government actuaries did identify relevant issues but consistently these were not followed through and allowed to evaporate."