MPs call for independent inquiry into FCA's insurance bungle

Investors threaten to sue watchdog over the wild gyrations in insurers' share prices
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The Independent Online

The influential chairman of the Treasury Select Committee last night demanded that an investigation into the City watchdog's disastrous handling of the announcement of an inquiry into millions of old life insurance policies be kept "wholly independent of the regulator".

Andrew Tyrie was speaking after the Financial Conduct Authority had come under fresh attack before MPs on his committee.

Otto Thoresen, the chief executive of the Association of British Insurers, said that vital trust between industry, government and regulator was damaged by the way the regulator allowed details of the inquiry to emerge through a newspaper interview.

"What we have had in this period has not been helpful towards that. We didn't have a press release. We didn't have a report on which we could compare what was being said. Until we did, it was very difficult," he told MPs.

"What we need to see is a regulator which is fair, which is balanced, which is objective. It is appropriate to have a bias to consumers. But it has to be in the right tone."

It took the watchdog six hours to issue a clarification on the scope of the inquiry – which will look at whether policyholders are being treated fairly – after fears were stoked that insurers might have to review 30 million policies. Investors have claimed that a false market was created in their shares.

But Mr Thoresen said he was "not looking for heads to roll" over the affair.

The investigation will be handled by Simon Davis from City law firm Clifford Chance. Mr Tyrie said MPs would take evidence from him after the publication of his report.

At the hearing the affair was described by Mr Tyrie as "a blunder" on the part of the FCA. It has led to calls for the resignation of the FCA's chief executive Martin Wheatley from industry figures, although the interview was given by Clive Adamson, head of supervision. (Mr Adamson had earlier shot to prominence after it emerged that he had approved the appointment of the now disgraced Paul Flowers as chairman of Co-op Bank.)

The ABI wrote to the Chancellor, George Osborne, to express its unhappiness. There has even been talk that some investors could sue the FCA over the wild gyrations in insurers' share prices on the day of the interview's publication last month. Mr Thoresen said he did not know whether there would be grounds for this. "We will have to wait for the FCA's review," he said.

The sector's shares had already been under pressure after Mr Osborne shocked the industry by announcing plans to end the requirement on pensioners to use their savings to take out an annuity.

Mr Tyrie said the market had been in "a shocking mess" prior to the announcement, with pensioners facing pitifully low rates. Mr Thoresen blamed all-time low gilt yields and the fact that many people are living for 25 to 30 years after their retirement. He said the market had been improving and innovating.