The independent action group for current and ex Equitable Life policyholders, funded by contributions.

Equitable Members Action Group

Equitable Members Action Group Limited, a company limited by guarantee, number 5471535 registered in the UK

Correspondence: 30/04/2003 - Letter to the Editor at the Financial Times from Alex Henney

30 April '03 - Letter to the Editor at the Financial Times from Alex Henney

Dear Sir,

You reported today (30/4/03) that the Government Actuary's Department (GAD) was defending the role of the appointed actuary in life assurers, and had observed that "it is wholly unclear that the appointed actuary system was to blame for the events surrounding Equitable Life".

As I commented in my submission to the Penrose Inquiry into the Equitable (see www.emag.org.uk), the complacency, ineptitude and vested interests of the British actuarial profession has as much to answer for in general regarding the Equitable as the US accounting profession has for Enron etc. But after the particular actuaries in the Equitable, the GAD has most to answer for the serial regulatory failure which allowed the collapse of the Equitable.

It failed for more than a decade to require life assurers to reserve for guaranteed annuity options, and it failed in the early 1990s to force the Equitable (which had no orphan estate) to deal with the potential risks it had taken on. Although the GAD was aware that Equitable's policy values exceeded its assets (i.e. it was running something akin to a Ponzi fund), it did nothing. This led to policyholders who exited in the 1990s taking out £bns more than their asset share - at the expense of those who remained and of new policyholders. It did not discount the contribution of a virtually valueless reinsurance contract to the solvency margin, and did not pick up a device the Equitable was using to reduce liabilities by £1bn. And when the chips were down after the House of Lords decision in July 2000, it failed to understand the risks in the Equitable's policies which resulted in the failure to sell the Society. But not until the FSA had allowed more policyholders to throw - and lose money - into Equitable.

Yours sincerely,

Chairman Equitable Members Action Group