Select Committee on Treasury Minutes of Evidence

Annex 1


  A reassurance treaty was arranged by the Society with a large professional reassurer late in 1998 with the objective of supporting the Society's regulatory reserves. This treaty was negotiated after full discussion with the Government Actuary's Department ("GAD") and was accepted by them for the purpose intended. Such reassurance is one of a range of normal methods available for the adjustment of known adverse features of the regulatory reserving basis.

  The purpose of the particular reassurance treaty was to allow the Society to benefit from its actual, very low, take up of GARs while remaining properly prudent in regulatory reserving terms. The existence of the reassurance allowed the Society to follow the guidance issued by GAD to appointed actuaries in January 1999 on reserving for GARs. That guidance required companies to allow for a potentially high take-up of GARs while recognising that this was unlikely. The treaty contract permitted the Society, prior to the House of Lords' decision, properly to benefit from its favourable effect on the regulatory balance sheet.

  The reassurance terms were renegotiated after the House of Lords' decision and remain in force. No claim has been made under the treaty. In the event of a claim, the amount would be recoverable from the Society by the reassurers from future earnings, provided that there are sufficient surplus earnings beyond those needed to support regulatory reserves.

5 February 2001

The following is the text of the Equitable Press Release, issued at 07:00 on Monday 5 February 2001.

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