Letter to the Chairman of the Committee
from the Economic Secretary to the Treasury
At my appearance before your Committee on 30
October I undertook to write to the Committee to clarify some
of the points that came up during the session.
The first point relates to Section 68 orders
issued by HM Treasury under the Insurance Companies Act 1982.
As you know, these orders allow for variations to be made in the
valuation of insurance company assets and liabilities for the
purposes of regulatory returns. Each order is given technical
consideration and approval by the FSA. The formal power to issue
an order could not be delegated to the FSA ahead of the full implementation
of the Financial Services and Markets Act 2000, so Treasury officials
currently act on FSA advice as to whether or not this power should
be exercised in each case.
The power under Section 68 will be replaced
after N2 by powers conferred directly on the FSA by section 148
of the Financial Services and Markets Act 2000 to modify or waive
FSA rules as they apply to particular companies.
Jim Cousins MP asked how many Section 68 orders
there were for the year 2000. The number of Section 68 orders
granted each year is published in the Insurance Annual Report,
which is laid before Parliament. During 2000, a total of 165 orders
The second point I would like to address is
the position regarding the legal immunity of the FSA before and
after N2, as raised by Andrew Tyrie MP. I can confirm that as
I suggested during the Committee session the option remains open
for people to pursue alleged failures of regulation through the
courts if they so wish. In addition, this option remains open
after N2 for any alleged acts or omissions prior to that date.
The statutory immunity which will cover the
FSA after N2 was the subject of considerable debate during the
passage of the Financial Services and Markets Act 2000. It was
accepted by Parliament that statutory immunity was essential for
the functioning of a single regulator such as the FSA in order
to achieve effective regulation, and that this should be balanced
by a strengthened complaints process. That is what we have put
in place. In addition, statutory immunity does not apply to actions
or omissions made in bad faith, to actions under the Human Rights
Act 1998 or to judicial review. I am confident that the decisions
made by Parliament at that time remain the right ones today.
I hope that this is helpful.
6 November 2001