Sun Life Assurance Company of Canada (UK) (SLOC UK) has been fined £600,000 ($963,603) by the UK’s Financial Services Authority (FSA) for failings in the governance of its with-profits business.
The FSA said the design and operation of SLOC UK’s governance arrangements were unclear and inadequate, resulting in a high risk that policyholders’ interests would not be protected properly.
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The firm’s governance failings came to light following two significant transactions it executed in 2008 and 2009.
According to the FSA, these transactions impacted upon one of SLOC UK’s with-profits funds, holding approximately 114,000 policies and £1.2bn in assets.
The regulator said SLOC UK’s with-profits committee failed to adequately review these transactions, while its board of directors did not approve the transactions.
The FSA has not criticised the merits of these two transactions, but has found that the review and approval process followed by SLOC UK was deficient. The FSA said this led to an unacceptable risk that proper independent judgement would not be applied to the transactions.
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By GlobalDataSLOC UK’s breaches occurred at a time of greater FSA focus on the with-profits sector. In September 2007, the FSA wrote to CEOs of with-profits firms drawing their attention to the need for their governance arrangements to include independent challenge of decisions concerning policyholders.
The FSA said (SLOC UK) should, therefore, have been well aware of the FSA’s expectations in this area.
Tracey McDermott, director of enforcement at the FSA, said: "It is essential that insurers operating with-profits funds ensure policyholders are properly protected. Independent judgement must be properly applied to issues that affect the interests of policyholders."
SLOC UK would have been fined £750,000, but agreed to settle and thus qualified for a 20% (Stage 2) discount.
SLOC UK is a life insurer operating a closed book of business including with-profits business. It is a wholly-owned subsidiary of Sun Life Financial, an international financial services group based in Toronto, Canada.
In a separate development, Sun Life Financial has dropped a plan to sell its UK business, Sun Life Financial of Canada, according to the Financial Times.
A spokesman for Sun Life Financial of Canada told LII that Sun Life Financial group is "committed" to its business in the UK. He declined to comment on media speculation as to why Sun Life Financial has reportedly no longer planned to proceed with a plan to sell the UK operation.
