Treasury probe into inherited estates

An inquiry into the way life assurers use surplus capital in their life funds has been launched by the Commons’ Treasury select committee as UK’s two biggest insurance groups seek to free billions of pounds.

The committee plans to launch an inquiry into inherited estates – money built up in life funds over decades beyond what is deemed necassary to meet obligations to policyholders.

Aviva is hoping to free about £3bn from its life fund after committing to paying £2.1bn to policyholders and £230m to shareholders while Prudential expects to decide by the middle of the year if it will free about £9bn of surplus capital in its life fund.

The committee will look at issues such as the structure of an inherited estate, whether it can be used for corporate purposes; rules for dividing surplus funds between shareholders and policyholders; and the approach taken by the Financial Services Authority.

The deadline for written evidence is April 14, and it could take between four to five months before the committee produces its report.

Further reading:

Directors flock to sell down share holdings

Read story in the Financial Times