In view of the Equitable Life saga the UK Financial Services industry regulator, The Financial Services Authority (FSA), is cracking down on the accounting practices of insurance companies.
The FSA wants insurance companies to value their assets and liabilities realistically, without using future profits to make long term liabilities appear lower. This would possibly mean insurance companies having to retain greater levels of capital for potential liabilities.
Our View:
This move would make accounting more realistic, thereby benefiting the consumer. If accounting practices are transparent then there is less chance of the Equitable Life saga happening to another insurance company.