Following the publication (in March) of the Penrose Report into the near collapse of Equitable Life, Lord Penrose, the author of the report refused to comment on the competence of Ernst & Young, former auditor to the embattled life assurance firm.
Abraham’s inquiry will investigate whether there was any maladministration by the Treasury or the Department of Trade and Industry in their handling of Equitable’s regulation.
Her fresh investigation appears to have been made subject to a government agreement that its scope will include the performance of the Government Actuaries Department, which was responsible for advising the regulators on Equitable’s financial performance.
Any finding of maladministration could be accompanied by a recommendation of recompense by the department or departments concerned.
Abraham’s earlier inquiry cleared the Financial Services Authority of maladministration and it is understood that that position will not be re-opened.
The Treasury and the DTI supervised regulation before the FSA was created.
The move was welcomed by MPs who have been pressing for the ombudsman to act since the Penrose Report.
Abraham cited criticisms in the Penrose Report – which said that while the regulatory system had failed policyholders, Equitable was the author of its own misfortunes – including the resources available to regulators and a failure by regulators and actuaries to keep up with developments in the industry.
The Treasury has said it will co-operate, but there were signs of a distinct lack of enthusiasm. Chancellor Gordon Brown’s agreement to an assistance scheme for failed and failing company final salary pension schemes not covered by the guarantee scheme was on the assumption he would not have to fund a payout for Equitable.
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