The decade-long Equitable Life
Assurance Society (ELAS) saga that has its origin in bad risk
management and regulatory shortcomings is finally nearing an end.
Policyholders of the 240-year old UK mutual insurer who suffered
losses following its near collapse nine years ago are to be
compensated, Mark Hoban, financial secretary to the Treasury,
announced on 22 July.
The announcement follows demands
from many quarters for a compensation scheme to be established. In
2007, a European Parliamentary enquiry into ELAS called for
compensation of aggrieved policyholders – an opinion shared by
Parliamentary Ombudsman Ann Abraham’s in a damming report on
regulatory incompetence published in July 2008.
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Although a decision on the extent
of compensation has yet to be finalised, Hoban said that it may be
between £400m ($610m) and £500m. An independent commission has been
established to advise on the allocation of payments and will report
in January 2011.
Whatever the final figure it
appears unlikely that it will satisfy policyholders represented by
the Equitable Members Action Group (EMAG)
which claims that am people lost up to half of their life savings
in the ELAS fiasco.
A few days prior to Hoban’s
announcement the EMAG stated: “Policyholders believe the eventual
sum paid out will be about £1bn, far less than the £4bn to £5bn
they have been demanding.”
The EMAG’s £4bn to £5bn figure was
born out by a study into compensation of ELAS shareholders
conducted by consultancy Towers Watson for a report commissioned by
the Treasury and undertaken by retired judge John Chadwick. The
report was published in May 2010.
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By GlobalDataIn its assessment Towers Watson found that had policyholders
impacted by ELAS’s woes had policies with other life insurers the
payout that they have received or will receive in future would have
in aggregate been between £4bn to £4.8bn higher.
