Mairead McGuinness Fine Gael MEP

Tuesday 6^th July 2010.  Equitable Life policyholders could be short-changed by the new British Government in its forthcoming compensation scheme for policyholders, Mairead McGuinness, Ireland East Fine Gael MEP who chaired the European Parliament’s investigation into the issue said today.

The European Parliament recommended that the British Government should compensate all policyholders, including about 8,000 Irish people, in full.

McGuinness, speaking in the European Parliament in Strasbourg, said the hopes of members of the Equitable Members’ Action Group (EMAG) had been raised arising from commitments they received from the Tory party in advance of the British general election.

“Mark Hoban, the UK Financial Secretary to the Treasury has now said that the Government will be making payments to Equitable Life policyholders.  However, he also indicated that it will be for ‘relative’ loss rather than full compensation.  This is very disappointing,” she said.

Having raised the hopes of policyholders prior to the UK elections there are now fears that compensation levels may be restricted to just 20pc of losses.

“I am urging the EU Commission to press the UK Government into honouring its commitments and as chair of the Committee of Inquiry I am writing on behalf of all policyholders to the UK Government expressing our concerns that the compensation offered may fall far short of expectations.

“Some policyholders have died without compensation being paid, others have been left suffering huge financial losses and are now terrified that they will once again lose out,” said McGuinness.

The Committee of Inquiry chaired by the MEP concluded that the problems arose because Equitable Life did not set aside adequate reserves to cover its liabilities and then ran into financial difficulties when interest rates began to fall in the 1990s.  The UK’s financial regulators were severely criticised for their “excessive leniency” towards the company’s inadequate reserves.

“Our Inquiry also concluded that EU life insurance legislation was transposed into British law in an unsatisfactory fashion. This raises the question of how well EU law is transposed in all Member States and how far this process is monitored by the Commission.

“The report identified that the European Commission needs to be more pro-active when monitoring the implementation of EU law.  These issues must be addressed.  Otherwise there is a real risk that something similar will happen again,” she warned.