Last week the FSA sent a letter to with-profits firms which stresses the need for firms to ensure that they are treating their policyholders fairly. The FSA conducted two thematic reviews last year. The letter sent last week drew firms attention to two main issues: governance arrangements and run-off plans for closed funds. The letter further considers some practices which the FSA believes fall short of the Principles, rules and guidance in relation to the management of with-profits funds.
The first review which the FSA conducted examined how firms provide independent input into the management of with-profits funds to ensure that the interests of policyholders are adequately considered. In the first review the following issues were identified:
- Some firms’ arrangements for independent input did not involve consideration of wider issues that could affect whether policyholders are treated fairly.
- Firms should identify and manage any conflicts of interest in the way that the firm uses independent reviewers to look at the firm’s management of with-profits funds.
- Firms did not always provide timely information to those responsible for the independent review of the management of funds.
The second review examined closed with-profits funds. The FSA found that the management of a number of funds had not paid enough attention to the manner in which funds in run-off were being managed.
In the letter from the FSA, Sarah Wilson, Director and Insurance Sector Leader, told firms that the FSA expects senior management of firms that operate with-profits funds to review how they have implemented the Principles for Business (and the SYSC requirements) in their governance arrangements and oversight of closed funds in run-off. Firms should consider whether their arrangements achieve the purpose intended; in particular that policyholders are being treated fairly.
For further information: To the CEOs of insurers that provide with-profits funds