Overview

On 29 June 2010 the FSA published a report summarising the conclusions of its review of with-profits firms carried out at the end of 2009.

The review focused on whether firms are treating their with-profits policyholders fairly, looking specifically at how senior management have implemented the FSA's Principles for Businesses, and the more specific rules in COBS 20 and SUP 4, which relate to with-profits business.

The report concludes that a significant number of firms are not adequately demonstrating the practices the FSA expects from a well-run with-profits business. It highlights two main areas of concern: ineffective governance of with-profits funds - the FSA considers that there is insufficient independent challenge to firms running with-profits businesses, for example from with-profits committees; and significant weaknesses in the quality of consumer literature - the FSA is not satisfied that all firms are doing enough to ensure that policyholders receive sufficiently comprehensive, timely and clear information to enable them to take a reasonable view of the risk and reward balance of their policies.

The report explains that the FSA is concentrating its with-profits supervisory activities on the areas of concern identified in the report. The review has led the FSA to begin a detailed review of several areas of COBS 20, including those sections relating to governance, post sale consumer communications, payouts, charges to with-profits funds, new business and closed funds specific issues. The conclusions of this review and any proposed changes to the Handbook will be published in a consultation paper before the end of 2010 (or where the proposals might be affected by Solvency II, in 2011). The report also contains the FSA's findings from an initial "lessons learned" exercise following the Aviva reattribution.

This briefing does not summarise the detail of the report, but instead discusses its key themes and their possible impact.

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