§ Mr. Nicholas WintertonTo ask the President of the Board of Trade what information he has about the value of pensions business currently handled by United Kingdom insurance companies; what information he has concerning the extent to which such insurance companies are trading in derivatives; what steps he is taking in the light of the Baring affair to issue guidance to such derivative-trading insurance companies; and if he will make a statement.
§ Mr. Jonathan Evans[holding answer 9 March 1995]: Premium income received by UK insurance companies during 1993 in respect of personal and occupational pensions business was estimated to be £14.6 billion.
United Kingdom insurance companies may be end users of derivatives but should not be traders. Provided they have adequate controls over their use, insurance companies may prudently use derivatives for the purposes of reducing the investment risks inherent in their portfolio or for efficient portfolio management. My Department issued guidance to all UK insurers in December 1994 setting out the objectives which an adequate system of control over their investments, including derivatives, must be able to satisfy. At the same time, we asked companies for a state of play report on the extent to which their systems complied with the guidance and, where necessary, on what remedial action they had put into effect. We are currently reviewing the responses and will take such follow-up action as is necessary.