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31 August 2001

INDEPENDENT INQUIRY INTO EQUITABLE LIFE

Letter from Ruth Kelly, Economic Secretary to the Treasury, to Lord Penrose

An independent inquiry into Equitable Life, to be headed by Lord Penrose, was announced today by Ruth Kelly, Economic Secretary to the Treasury.

The Inquiry will examine the circumstances leading to the current situation at Equitable Life and identify any lessons to be learned for the conduct, administration and regulation of life assurance. The Inquiry will report to Treasury Ministers.

Announcing the Inquiry, Ruth Kelly said

"The Government has considered carefully the concerns of policyholders and representative bodies including the Select Committee of the House of Commons.  Equitable Life raises important issues which deserve consideration by a full independent inquiry. We are announcing today that we have asked Lord Penrose to conduct an independent inquiry into Equitable Life and to consider what lessons can be drawn for the conduct, administration and regulation of the life assurance business. It is important that lessons are learnt from what has happened – this Inquiry will allow us to do that.

“The Inquiry is being established on a non-statutory basis.  We hope everyone concerned will feel able to cooperate fully and frankly.  However, the Government will, if necessary, establish a statutory basis for the Inquiry. 

“Equitable Life is currently preparing proposals for a compromise deal which we understand are likely to be put to policyholders in the coming weeks.  In announcing the Inquiry now, rather than waiting until Parliament resumes at a time when policyholders would be considering the compromise deal, the Government is keen to ensure that there is no confusion between the Inquiry and the compromise deal.

“The Inquiry will look into the circumstances leading to the current situation of the Equitable.  It will not comment or offer advice on the merits of any compromise deal proposed to Equitable Life policyholders; nor will it review past judicial decisions in relation to Equitable or pre-judge future decisions properly taken by the courts.”

“A review is currently being carried out by the FSA into the FSA's role in the period from 1 January 1999 until the Equitable closed to new business in December 2000.  The Government looks forward to receiving that review.  However, the Government believes it is now in the public interest to have a wider, independent review that can look back as far as is necessary.  The Government expects the FSA review to be an important input into the Lord Penrose Inquiry.  The Government has said that the FSA review will be published.  The actual timing will need to be considered in the light of the timetable for Lord Penrose's inquiry."

“The Inquiry will take some time to complete and we want Lord Penrose to start work without unnecessary delay.”

Lord Penrose said:

“I am pleased to have been asked to lead this Inquiry. I believe it will cover some important and complex issues and I am looking forward to tackling the work ahead.”

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Notes to Editors:

1.                The terms of reference for the Inquiry are:

To enquire into the circumstances leading to the current situation of the Equitable Life Assurance Society, taking account of relevant life market background; to identify any lessons to be learnt for the conduct, administration and regulation of life assurance business; and to give a report thereon to Treasury Ministers.

2.                Lord Penrose is a graduate of Glasgow University (MA, LLB) and a Chartered Accountant. He was admitted to the Scottish Bar in 1964 and appointed Queen’s Counsel in 1978. He has also served as a Chairman of the Financial Services Tribunal and was President of the Scottish proceedings of the Aircraft and Shipbuilding Industries Arbitration Tribunal from 1977 to 1983. From August 1994 to November 1998 he served as the first full time commercial judge in Scotland, dealing with specialist commercial matters.

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3.                Lord Penrose is independent of the Government and of Equitable Life.

4.                The purpose of the Inquiry is to provide an authoritative account of the circumstances and to draw lessons for the future on the conduct, administration and regulation of life assurance business. The Inquiry will not offer advice to policyholders nor will it review past judicial decisions in relation to Equitable or pre-judge future decisions properly taken by the courts.

5.                Ruth Kelly wrote to Lord Penrose today to ask him to lead the Inquiry. A copy of this letter may be obtained on the Treasury website. Lord Penrose has agreed to lead the Inquiry.

6.                The Inquiry will cover information that is private and confidential, some of which is protected by provisions of the Insurance Companies Act and the Financial Services Act 1986. As such, it will be necessary for the majority of the Inquiry to be held in private.

7.                Lord Penrose will start work immediately.

8.                The results of the Inquiry will be published so far as possible, subject to legal and commercial confidentiality issues.

9.                This and other Treasury press notices may be found on the Treasury website at www.hm-treasury.gov.uk.

10.           Media enquiries should be addressed to Simon Moyse in the Treasury Press Office, tel (020) 7270 4420.

11.           Non-media correspondence to the Inquiry should be sent to:

Equitable Life Inquiry

Room 35a/G

Government Offices

Great George Street

Parliament Street

London

SW1P 3AG

e-mail: EL.Inquiry@hm-treasury.gsi.gov.uk

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