The next phase of the Equitable Life saga will be initiated by the government in the next couple of weeks when it announces its response to the Parliamentary Ombudsman's investigation and the report the ombudsman, Ann Abraham, submitted back in July.
There was a 90 minute debate in Parliament last week, initiated by the Liberal Democrat MP Jo Swinson. Amid the predictable complaints about the long delay in the government's response – originally promised for the "autumn"– there were repeated calls for any compensation scheme the government agrees to to have a "clear, transparent and independent process". The ombudsman's report suggested that it could take six months from the announcement of any compensation package by the government to get such a process agreed and operational.
Putting aside the arguments about how much compensation would be appropriate, I am surprised that no-one has so far suggested using an established mechanism to deal with this – the Financial Services Compensation Scheme.
The FSCS has already been pressed into action to administer the compensation for UK depositors of the collapsed Icelandic banks, creating an obviously precedent for asking it to act outside of its strict terms of reference. Using the FSCS would also by-pass the looming arguments about who would sit in judgement on any new compensation authority established especially for the purpose of sorting out payments the policyholders of Equitable Life. Those of us at the All Party Parliamentary Group on Insurance & Financial Services' recent meetings on Equitable Life were given a flavour of the arguments that might arise if a new body has to be set up.
Of course, it is not only the process that will be open to dispute but the amount of money offered. You can be certain that the government will not want to write a blank cheque (if, indeed, it writes any sort of cheque for this) which is why a process that attempts a case-by-case assessment of loss without a final figure in mind is probably a non-starter. Much more likely is an announcement of a sum available for compensation almost on a take it or leave it a basis. If this is the case then it makes the argument for giving it to the FSCS to distribute even more compelling.
As to the sum the government is likely to put on the table? My bet is on £1bn. It is about a quarter of what the Equitable Members Action Group is looking for but a nice, round figure that might be enough to buy off many of the policyholders anxious for some money in their retirement and before they die.
With great sadness we confirm that Sir David Rowland, our former Chairman from 1993 to 1997, has passed away. He played a critical role in safeguarding the future of the Lloyd’s market through perhaps its most difficult period.— Lloyd's (@LloydsofLondon) February 18, 2019
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