Department criticised over collapsed insurance firm

The Department of Enterprise, Trade and Employment is sharply criticised in a report into the handling of collapsed British insurer Equitable Life that will be debated in the European Parliament today.

The report slates the British government for its role in the affair, which saw about one million Equitable customers, including 6,500 Irish investors, suffer heavy losses on their pensions when the company collapsed in 2001.

However it also lambasts financial regulators in the Republic and in Germany for their failure to protect Irish and German customers of the company.

Fine Gael MEP Maireád McGuinness, who chaired the European Parliament's committee of inquiry, said the report would criticise the "unjustifiably passive" approach to Equitable Life policyholders.

"It is regrettable, if not disturbing, that no one in Ireland at government or regulatory level accepted responsibility for the inadequate actions undertaken by the Irish regulator prior to 2003," she said. "This is unacceptable and unfair to the 6,500 Irish policyholders who lost large amounts of money."

The losses were incurred following a House of Lords ruling forcing the mutual company to honour guarantees made on some older policies.

The ruling triggered massive cuts on the value of newer policies in 2001.

"Late joiner" Irish investors, who had not been told of the company's potential £1.5 billion (€2.2 billion) liability to former policyholders when they bought their policies, later found they were not eligible for compensation for mis-selling from the British financial services ombudsman.

Ms McGuinness said the committee's investigation into who was responsible for Equitable's operation in the Republic had become "a game of ping-pong".

Mary O'Dea, the consumer director of the Irish Financial Services Regulatory Authority, which took over regulation of financial services in May 2003, told the committee that it had no responsibility for events that took place before that date.

At the time of Equitable's collapse, the Department of Enterprise, Trade and Employment regulated the insurance sector. However Ms McGuinness said the committee was told by the department that it was no longer responsible for insurance regulation and could not be of any assistance.

This discrepancy created a "big chasm" in consumer protection and was never cleared up, she said yesterday.

The report finds that British regulators did not properly supervise the company. It recommends that the British government compensate policyholders both inside and outside the UK.