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WP firms failing on independence

With-profits firms have been blasted for not going far enough in their governance and failing to have enough ind-ependent people on theircommittees.

AKG Actuaries and Consultants names Scottish Widows, Royal Liver, LV= and Wesleyan Assurance as firms that have with-profits committees made up of non-executive directors, executive directors and evena former managing director, in the case of Wesleyan.

AKG communications director Guy Vanner says: “Some companies have a surpris-ing interpretation of independence. Companies are starting to do more but could easily go a bit further and we would like to see adoption of best practice.”

In its conduct of business rules, the FSA states with-profits governance arrangements should involve some independent judgement in the assessment of compliance with the principles and practices of financial management.

This can be provided in different ways, including establishing a committee, but the FSA does not state that members should all be independent of the board.

In a Dear CEO letter in September last year, the FSA said: “We found examples of the potential for conflicts of interest, where either the independent reviewers are also involved in other work with the firm or where some or all WPC members are executives of the firm.”

A spokesman for the Aviva policyholder advocate office says: “Governance is vital and we believe that committees should comprise entirely of independent members.”

A Scottish Widows spokes-man says: “Our aim is to strike a balance between independence on the one hand and board responsibility on the other. Boards of companies are responsible for the operation of the business.”

An LV= spokeswoman says: “We think that how we operate stands up and can be seen through our performance. As we are a mutual, our members are at the heart of everything we do.”

Royal Liver and Wesleyan were unavailable for comment.

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