The FSA should urge troubled life offices to seek buyers and consider mergers to avoid a future Equitable Life-type debacle, says Conservative frontbencher Howard Flight.
As the FSA moves towards redefining its role as the insurance regulator, Flight, the Shadow Paymaster General, says it should push life offices which have unreasonably high debt to asset ratios and may be in danger of becoming insolvent towards finding a buyer. He says the FSA should act as the Bank of England did when it retained responsibility for regulation of the banking industry in exerting behind the scenes pressure on companies in financial trouble to pursue mergers or acquisitions.
Flight says: “The FSA has a job of behind the scenes pushing and pulling to make sure that the companies it regulates do not stray into insolvency.
“If it finds debt to asset ratios which look to be on the edge, then they have got a problem. It should encourage them to seek mergers or acquisitions if they are in trouble.”
However, the FSA has dismissed Flight's call. Spokesman Rob McIvor says: “A lot of our work is carried out behind closed doors because it is commercially confidential but we are not going to act as shadow managers for firms.”