Following more cuts by Equitable to its with profits annuity rates and more fears of insolvency, another wave of policy holder bail outs has started.
The company is now closer to insolvency and the money put aside for claims has reduced from £1.1bn in December 2001 to £382m at the end of June 2002. To make matters worse, the industry regulator, the Financial Services Authority is allowing Equitable to continue its operation in the event of insolvency until assets and liabilities are brought back into line. This means that the solvency rules that normally apply to insurance companies have been relaxed.
If Equitable did become insolvent, policyholders would be entitled to compensation from the Financial Services Compensation Scheme. However, the assets of Equitable would have to be independently valued in order to set the levels of compensation.
Now that these extra cuts have been made to with profits annuity rates, these policyholders will now see a 30% cut in income.
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