The U.K. market regulator hired Simon Davis, a litigation partner at Clifford Chance LLP, to lead an independent inquiry into a press leak that sent shares in insurance companies tumbling last month.
Davis will investigate why the Financial Conduct Authority took so long to clarify a news story about an intended review of the life-insurance industry and “where senior accountability should lie,” the agency said on its website today. Davis was appointed by non-executive directors on the FCA’s board.
“The aim is to publish the final report as quickly as is reasonably possible,” the London-based regulator said in its statement on the inquiry, “bearing in mind the time needed by Simon Davis to complete his investigation.”
The FCA was criticized by lawmakers and insurance companies alike for taking several hours to clarify a March 28 report from the Daily Telegraph newspaper that it would review 30 million life-insurance policies stretching back to the 1970s. U.K. insurers, including Prudential Plc (PRU), Aviva Plc and Resolution Plc, had as much as $4.2 billion wiped off their market value.
Shares recovered later that day, when the watchdog said it only intended to review a sample of firms, rather than each policy, and wouldn’t apply current standards retroactively. The FCA said it intends to examine how customers in the life-insurance market have been treated.
Chancellor of the Exchequer George Osborne said in a letter last week that the incident was “damaging both to the FCA as an institution and to U.K.’s reputation for regulatory stability,” while the Association of British Insurers called the Telegraph story “premature and selective disclosure.”
“Government, the industry and the regulator should think more strategically about savings going forward,” Otto Thoresen, who heads the ABI, said to Parliament’s Treasury committee today.
The committee asked the ABI to provide information on whether insurers were raising capital on the day the FCA story was published to help gauge the long-term financial implications for the companies involved. Letters sent to Osborne and FCA Chairman John Griffith-Jones on April 1 from Thoresen, who formerly ran Aegon NV’s British division, and Prudential Chief Executive Officer Tidjane Thiam were also released by the committee today.
Thoresen said the ABI was told that the FCA had briefed the Daily Telegraph, though he was not shown the substance of the review or that the information would be market-sensitive.
“We didn’t have a press release, we didn’t have a report against which we could compare what was being said and until we did it was very difficult to give people confidence,” Thoresen told the committee today.
To contact the editors responsible for this story: Anthony Aarons at firstname.lastname@example.org Keith Campbell, Steve Bailey