PRA to take over responsibility for with-profits

30 June 2011 2:30 pm | By Natalie Holt

The FSA says the Prudential Regulation Authority will be ultimately responsible for regulating the with-profits sector.

At the ABI conference, FSA chief executive Hector Sants said it is important to clarify where the with-profits sector will sit in the new regulatory structure, particularly post-Equitable Life.

Sants said: “This is an area where the underlap risk created by the twin peaks system is particularly dangerous. The draft Financial Services Bill in consequence makes clear the PRA will have sole responsibility for balancing the interests of policyholders with the prudential position of firms and thus will have ultimate responsibility for the decisions of this nature in relation to with-profits policies.

“The PRA will however seek advice from the Financial Conduct Authority on material decisions in this area and the nature of arrangements between the PRA and the FCA will be set out publicly.”

Sants added that the regulator will publish a memorandum of understanding setting out how the PRA and the FCA will interact.

Treasury financial secretary Mark Hoban announced in May the compensation payment plan for Equitable Life policyholders, with £620m going to 37,000 with-profits investors to compensate them for relative losses, but 10,000 policyholders who annuitised before 1992 will receive nothing.

Chancellor George Osborne made a total of £1.5bn available for compensating Equitable Life policyholders in the October spending review.

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