The Treasury Committee has decided to investigate inherited estate (or ‘orphan assets’) held by life assurance companies’ with-profts funds. Insurers have accumulated such estate as from year to year they are entitled to withhold a proportion of policyholders’ payments in order to assist the returns between good and bad years.
In some cases insurers have used the funds for purposes other than paying out to policyholders such as to subsidise corporate activity, or for the benefit of shareholders. The Treasury Committee has invited interested parties to submit written evidence relating to the following topics:
- The regulatory definition of the inherited estate in a with-profits fund.
- The extent to which life assurance companies should be permitted to diminish inherited estate in order to subsidise corporate activity, including financing new business, making strategic investments, paying shareholder tax and paying the costs of compensation for mis-selling.
- Whether allowing life assurance companies to use inherited estate to subsidise corporate activity has any adverse effects on competition.
- The principles that should guide the division of inherited estates in 90:10 funds between policyholders and shareholders upon reattribution of the estate.
- The appropriate sharing of inherited estate between current and future policyholders.
- Whether policyholders’ reasonable expectations of distributions from inherited estate should be zero or have a positive value.
- Whether any distribution of benefits from the inherited estate should be made in a single payment or phased over several years.
- The role and responsibilities of the Policyholder Advocate.
- The framework for negotiation between the Policyholder Advocate and the life assurance companies.
- The role of the with-profits committees of life assurance companies.
- The approach of the Financial Services Authority to the issue of inherited estate.
Written evidence should reach the Treasury Committee by Monday 14 April 2008
For further information: Treasury Committee inquiry into inherited estate