Equitable Life must have been fully aware of the risks of not reserving against its liabilities as far back as the mid-1970s, according to top actuary Desmond Le Grys.
Le Grys, who was managing director of Munich Re until his retirement in 1996, says instead Equitable relied on blind faith that it would be allowed to slash its bonuses when the time came.
He says there were a number of smaller life offices that went bust in the mid-1970s because of the guarantees they were offering policyholders and Equitable knew of the risks.
Le Grys's claims directly contradict claims made by Equitable chief executive and former appointed actuary Chris Headdon, who told a Parliamentary committee that Equitable faced an unexpected liability when it realised the extent of the trouble it was in.
Le Grys says the question Equitable should be asked is whether it ever got an independent legal opinion that backed up its actions.
Le Grys says he warned of the scenario Equitable now faces in his book, The Financial Management of Developing Life Offices, published in 1979, which dealt with potential threats to a life office's solvency. In the book, he describes what he calls creeping insolvency, including the threat posed by guaranteed annuities.
Le Grys says: ” Equitable was different from other companies, they weren't stupid and they knew the situation they were in as far as the potential liability but they put all their faith in the belief they could reduce their bonuses if things got difficult.”
An Equitable Life spokesman says: “Prior to the House of Lords decision, there was no reason to think we were doing anything wrong.”