View more on these topics

Solvency lifeline saves insurers selling equities in vicious circle

The FSA is easing regulatory solvency margins as it admits that life companies are pressing or failing the requirements in the stockmarket slump.

In a letter sent to chief executives of all life insurers last Friday, FSA managing director John Tiner says the move is to avoid panic dumping of equities when the markets fall as life offices try to preserve regulatory margins.

He writes: “There is a risk that these sales cause further falls which, in turn, trigger additional selling and a downward spiral in equity market prices.”

He said companies could apply for a waiver but weaker companies should submit plans, such as a capital injection, closure to new business, sale or transfer of business or a reallocation of assets.

For regulatory purposes, firms are required to have a safety buffer of 4 per cent of assets over liabilities. The FSA has already indicated a move towards greater reliance on “realistic” solvency rather than inflexible regulatory minimums by 2004.

The news follows a round of downgrades of insurance companies by Standard & Poor&#39s, with both Standard Life and Prudential losing their AAA rating. Legal & General keeps its AAA rating but is put on negative outlook.

Tiner writes in the letter: “In considering requests for waivers, we would take into account the firm&#39s realistic position. This would help us satisfy ourselves that, if the waiver were to be granted, there would be no undue risk to consumers.”

ABI director general Mary Francis says: “This should ensure insurers will not have to sell equities when that is not in the best long-term interests of their policyholders.”


Homebuyers are &#39better insulated&#39 against slump

Nationwide says borrowers are better protected from a slump in house prices than in the past by having put down bigger deposits. But it warns lenders to stay cautious and test borrowers&#39 ability to meet repayments. The society says house prices increased by 1.7 per cent last month and 26.5 per cent over the last […]

Saga offers guide to annuities

Saga is publishing an annuity guide to help those approaching retirement through the maze of options. It says as annuity rates fell by 12 per cent last year- the second-biggest decline in eight year – the choices that people make are especially critical. The guide covers a variety of topics, including descriptions of the different […]

Standard Life slashed payouts by 15 per cent

Standard Life has slashed with-profits payouts by up to 15 per cent blaming extremely challenging investment conditions. It says investment performance of its with-profits fund was down 12.5 per cent for last year, compared with a 20 per cent fall in the FTSE All Share. It claims that returns despite the cuts are better than […]

Fortune Asset Management – Lumen Global Value Fund

Tuesday, 4 February 2003 Type: Hedge fund Aim: Growth by investing in emerging markets Minimum investment: Lump sum $50,000 Place of registration: Cayman Islands Investment split: 100% in emerging markets Charges: Initial up to 5%, annual 1.5% Commission: Subject to negotiation Tel: 020 7355 2000

‘How to…audit your auto-enrolment scheme compliance’

Avoid pension penalties with our auto-enrolment checklist

According to the Pensions Regulator’s annual commentary and analysis report released this month, 785 potential non-compliance cases were referred for investigation, with 23 auto-enrolment compliance notices issued. And they predict that the use of their statutory powers is only going to increase.


News and expert analysis straight to your inbox

Sign up


    Leave a comment


    Why register with Money Marketing ?

    Providing trusted insight for professional advisers.  Since 1985 Money Marketing has helped promote and analyse the financial adviser community in the UK and continues to be the trusted industry brand for independent insight and advice.

    News & analysis delivered directly to your inbox
    Register today to receive our range of news alerts including daily and weekly briefings

    Money Marketing Events
    Be the first to hear about our industry leading conferences, awards, roundtables and more.

    Research and insight
    Take part in and see the results of Money Marketing's flagship investigations into industry trends.

    Have your say
    Only registered users can post comments. As the voice of the adviser community, our content generates robust debate. Sign up today and make your voice heard.

    Register now

    Having problems?

    Contact us on +44 (0)20 7292 3712

    Lines are open Monday to Friday 9:00am -5.00pm