Equitable group loses patience

Equitable group loses patience

An Equitable Life policyholder action group yesterday revealed it is considering taking the battle for compensation to the European courts in what would mark a new chapter in the long-running tussle.

The disclosure came as Equitable Members' Action Group (Emag) published its "alternative Penrose report" in which it criticised the regulators, including the Financial Services Authority and the Department of Trade and Industry, for allegedly missing numerous opportunities to address the problems which almost led to the insurer's collapse.

Emag, which has more than 10,000 members, said it had decided to publish its own account of the insurer's downfall and was "fed up" waiting for the official report from Scottish judge Lord Penrose, which was delivered to the Treasury this week. It emerged this week that the Treasury - which commissioned the report more than two years ago - is likely to mount a strong case against a blanket payment to all Equitable Life policyholders should the judge pin the blame on government departments for regulatory failings. It is thought the Treasury will argue that many investors made good money from Equitable over the years.

Yesterday Emag said it might take its battle to European courts. "We are going to explore what the legal possibilities are," Paul Braithwaite, the group's general secretary, said. "Emag is trying to do the groundwork to look at the avenues, and prospective costs and rewards, of side-stepping the British.....continued below

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legal system and going straight to the courts in Europe."

The world's oldest mutual life insurer closed its doors to new business three years ago, and later repeatedly slashed the value of a million policyholders' investments, after it lost a legal battle in July 2000 involving so-called guaranteed annuity rates, sold as part of pension plans until 1988.

Emag's 30-page report said that, while its own analysis had suggested there was a hidden "billion pound asset deficit" throughout the 1990s, caused by the insurer paying out too much in bonuses to policyholders, there was "little evidence of any action by regulators prior to 1998".

It said that the DTI and the Government Actuary's Department "simply did not perceive until much too late (1997) that there was a GAO [guaranteed annuity option] problem ... They took far too long to identify (in 1998) the society's asset deficit and even then did not appreciate its importance."

The report also criticised the FSA, saying it had the opportunity to shut down the insurer in the wake of the House of Lords ruling of 2000 but instead allowed the society to continue advertising for new investors.

Mr Braithwaite said that throughout the 1990s Equitable had been operating like a "pyramid scheme". Emag said that in its opinion only those people who were members of Equitable Life in July 2001, when the insurer announced a 16% cut in policy values, were candidates for compensation. But this was likely to be more than 500,000 people. An Equitable spokesman said it had not seen the Emag report. He added: "It is appropriate for the society to wait for the Treasury to publish the Penrose report."

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