Equity Life kept policy holders in the dark

POLICY holders in Equitable Life were deliberately kept in the dark about the dire financial situation of the company, a European Parliament inquiry heard.

The Minister for Enterprise and Trade Micheál Martin may be called by the committee to give evidence, its chairperson, MEP Máiread McGuinness said.

There were 1.7 million policy holders including 8,300 Irish in 2000 before the company closed for business with debts of close to €6 billion.

Insurance regulators from Ireland and Britain attending the hearing yesterday were unable to explain the debacle that lost thousands of people their money.

After hearing from them, Fine Gael MEP Ms McGuinness said it was still unclear how Equitable Life continued to sell policies in Ireland at a time when it was very clear that the business was in difficulty.

Forensic accountant Colin Slater from Burgess Hodgson, who investigated Equitable Life’s finances, said that during the 1990s the board paid bigger bonuses to policy holders than the company could afford.

As a result it was short over €3.6bn in 2000. One year, 1990, the shortfall was high as 28%, he said.

“This explains why no other insurer was willing to buy it. No one was prepared to buy it even for £1. Seven months later the policy value was cut by 16% — worth £4bn [€6bn] — by the new Board in July 2001.

“Equity Life was brought down by 10 years of over-bonusing, and the regulators knew it,” said Mr Slator.

He did not believe the directors of Equity Life set out to defraud people but did vote for large bonus payouts.