Eindrapport EP commissie Equitable Life schandaal klaar (en) - Hoofdinhoud

The European Parliament's committee of inquiry into Equitable Life, in adopting its final report on Tuesday, strongly backed its rapporteur's view that the UK government should set up a compensation scheme for victims of the debacle. MEPs also agreed that EU policy and law making must be overhauled to prevent such cases in future and to foster a healthy European pensions and insurance market.

The report - drafted by Diana Wallis (ALDE, UK) and adopted by the committee by 13 votes to 0 with 4 abstentions without any major amendments - must still be approved by Parliament's Strasbourg plenary in June. However, no further amendments can be tabled: the plenary can only endorse or reject the committee's text.    

The EP inquiry was set up in January 2006 in response to two petitions received by Parliament from policyholders who were among the victims of the financial debacle at the Equitable Life Assurance Society (ELAS) that inflicted major losses on over a million people, mainly in Britain but also in other countries, including Ireland and Germany. 

The committee has been looking into the role of UK government and regulators in implementing EU insurance law and that of the European Commission in monitoring the implementation of such law. The spotlight has been on two key issues: the plight of the policyholders and the implications for the European single market in financial services.

CONCLUSIONS OF THE COMMITTEE

EU directives inadequately implemented in the UK

The committee argues that the UK's technique of implementing EU insurance legislation in a piecemeal fashion (through a number of different legal acts) "lacks clarity", that "UK regulators and authorities did not adequately respect the ultimate purpose of the Directive" and that "the implementation process as a whole was flawed".

UK regulators at fault

The UK regulatory system (including such bodies as the Financial Services Authority, the Treasury and the Department of Trade and Industry) is severely criticised, notably for its "excessive leniency" towards Equitable's solvency margin. This is attributed partly to Britain's "light touch" regulatory policy, which the report says went a step too far and "contributed to a weak regulatory environment, which allowed the difficulties at ELAS to grow unchecked".

Another factor was the UK regulators' "undue `awe' or `deference'" towards Equitable.  The regulators apparently believed the company "to be `too good and too reputable' to make mistakes". They also "knowingly failed to challenge" the "conflict of interests" in the fact that Equitable's Appointed Actuary was simultaneously its Chief Executive. Overall, the report challenges the Penrose report's view that "regulatory system failures were secondary factors". 

Redress hard to come by in the UK_

Many victims of the crisis "had great difficulty in knowing what route to take or who to apply to in trying to obtain information, make a complaint and obtain redress", says the committee. The result was "a pattern of confusion and much inequality of treatment". Taking Equitable to court was an option available to "only a few affluent policyholders", while ombudsman schemes, such as the UK's Financial Ombudsman Service, proved ineffective. 

_let alone in other Member States

Non-UK policyholders, such as the 8,000 in Ireland and 4,000 Germany, suffered from a further problem: which regulatory bodies were responsible?  Was it those in the "home state" (the company's country of origin) or the "host state" (the country where it sold its policies)? Too often, home and host state authorities were able "to shift responsibility from one to another for dealing with complaints" and this led to non-UK policyholders "falling between two stools".

Ultimately, says the committee, the Third Life Directive "lacks clarity in defining the powers, roles and responsibilities of home and host Member State authorities". This lack of clarity is a problem not just for the Equitable Life victims but also, more broadly, for business and consumer protection in a Europe-wide single market, say MEPs.   

RECOMMENDATIONS OF THE COMMITTEE

Compensation for victims: UK government "under an obligation"

The EP committee cannot force the payment of compensation. However, its report argues that, in view of its "failure to comply" with EU legislation and in the absence of any real possibility of redress for the victims, "the UK Government is under an obligation to assume responsibility". It therefore "strongly recommends that the UK Government devise and implement an appropriate scheme with a view to compensating Equitable Life policyholders both within the UK and abroad". It also "urges the UK Government and all affected parties to accept and implement appropriately any recommendations the UK Parliamentary Ombudsman may make" in her second report on Equitable Life, which is due to be published soon.

Policy and lawmaking

Looking at the broader issues, the report points to "the need to foster consumer confidence in pension products" and hence requests that "any financial services legislation duly recognizes the priority of consumer and investor protection issues" while at the same time minimising red tape and not stifling innovation.

The committee also calls for EU legislation to give consumers "clearly defined rights which can be relied on before national courts" and for better alternative dispute resolution schemes throughout the EU. In short, if business is to get the benefit of the single market, consumers must have clear rights too. Companies must be told "there is `no mobility without liability'".

Role of EU institutions in monitoring legislation

The European Commission, according to the report, did not monitor the application of the EU insurance legislation effectively. In future it should be "more proactive" on this front, for which purpose it would need more resources and staff (particularly linguistic).  

The EP's standing committees should also play a more active role in following up the implementation of legislation in their own policy areas, for example through their rapporteurs or an "implementation taskforce" to be set up within each committee.

More powers for EP committees of inquiry

Lastly, the report "expresses irritation and regret at the discourteous conduct of several witnesses who did not cooperate with the Inquiry". Witnesses who failed to appear before the committee are listed in the report (Part 1, Introduction). MEPs therefore call for broader powers for the EP's committees of inquiry, notably as regards the summoning of witnesses, collaboration of Member States' authorities and investigative powers.