§ Mr. GardinerTo ask the Chancellor of the Exchequer what guidelines the FSA has issued to companies about reinsurance practices following the disclosure of Irish European Reinsurance Company's involvement with(a) Independent Insurance and (b) Equitable Life. [19633]
§ Ruth KellyThe FSA's Interim Prudential Sourcebook for Insurance Companies already makes provisions covering reinsurance practices. In particular, it requires insurance companies to prepare their accounts following the insurance accounting guideline contained in the ABI Statement Of Recommended Practice. This covers the treatment of reinsurance contracts in some detail, and requires that the accounts should properly reflect the economic substance of any transaction.
The Interim Prudential Sourcebook also requires companies to have appropriate procedures for assessing the creditworthiness of counterparties, including in particular reinsurers.
In addition, the FSA has placed a responsibility on all firms to be "open and honest" with the regulator and, for certain firms covered by schemes of operation, there will be a specific requirement to disclose reinsurance arrangements and to notify the FSA of a material change to these.
67WThe FSA intends to review the use of financial reinsurance within the insurance market and the extent of the industry's reliance on it.