FSA tightens usage of with-profits surpluses
The Financial Services Authority (FSA) has announced that life insurance companies will no longer be able to meet compensation and redress payments from their with-profits funds.
From 31st July, liabilities arising from operational failures (including mis-selling) must be borne by shareholders, not policyholders.
Last year, a report by the Treasury Select Committee accused the FSA of not having clear principles for regulating the surpluses accrued on with-profits funds.
The excess arises because insurers hold back a proportion of policyholders’ investment returns during profitable years, to cover payouts during years when returns are poor.
MPs clearly rejected the practice of using the money for compensation due to customers who have been mis-sold policies.
Commenting on the new rules, the regulator’s director of retail policy and conduct risk, Dan Waters, says: “The changes we are confirming … seek to ensure that policyholders do not pay for costs resulting from management failings.”
He adds: “In future, the liability for compensation and redress payments will rightly fall to shareholders as the owners of life companies.”
Category: Financial Services Authority News, Insurance News
Visited 1082 times, 1 so far today
Comments (0)
Trackback URL | Comments RSS Feed
There are no comments yet. Why not be the first to speak your mind.