Appendix A: The Prudential Regulation of Equitable Life
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Legal stages in an insurer's failure
- Cover for solvency margin above EC Directive minima, but financial condition is a cause for regulatory concern, which raises the need to consider exercising intervention powers under section 37 Insurance Companies Act 1982 (ICA);
- breach of solvency margin i.e. the required minimum margin (RMM) which under section 32(4)(a) ICA would require the insurer if requested by its regulator to submit a plan for the restoration of a sound financial position;
- breach of Directive minimum guarantee fund (MGF). Regulation 22 of the Insurance Companies Regulations 1994 provided that in the case of Equitable the MGF should be one third of the RMM. If the MGF was breached, section 33(1) ICA required the insurer if requested by its regulator to submit a short-term financial scheme;
- anticipated insolvency under non ICA legislation (e.g. the Companies Act 1985) i.e. there is a risk of it no longer having any surplus assets in excess of its liabilities;
- implementation of reorganisation measurers short of winding-up, for example, provisional liquidation or a section 425 scheme of arrangement (noting that (v) may occur before and prevent (iv)); and
- winding-up.
