The EU committee of enquiry into the Equitable Life debacle is to ask the Department of Enterprise, Trade and Employment to attend a meeting in Brussels to explain its role in regulating the troubled insurance company prior to the establishment of the Irish Financial Services Regulatory Authority.
Fine Gael MEP Mairéad McGuinness, who chairs the committee, said yesterday that it was still not clear how Equitable Life continued to sell policies in the Republic at a time when it was very clear that the business was in difficulty.
"There were concerns about Equitable, even while they were continuing to do business in Ireland," Ms McGuinness said.
Equitable Life operated a branch in Ireland from 1991 to 2001 and was subject to prudential supervision by the UK regulator. At the time, Irish legislation did not impose any consumer protection requirements on insurance companies operating here.
About one million Equitable Life customers, including 6,500 Irish investors, suffered heavy losses on their pensions investments following a House of Lords ruling in the UK requiring the UK mutual to honour guarantees made on some older policies.
The ruling triggered massive cuts on the value of newer policies in 2001.
"Late joiner" Irish investors, who had not been told of the company's potential £1.5 billion liability to former policyholders when they bought their policies, later discovered they were not eligible for compensation for mis-selling from the UK financial services ombudsman.
Ms McGuinness said yesterday that changes made by the UK treasury and financial services authority to their procedures were too late to help Equitable investors.
"We've had a similar experience with food scares. We tend to react after the crisis has happened."
Unlike the practice with food scares, where information is quickly spread among EU member states, there had been no procedures for the UK regulator to issue a rapid alert to the Department of Enterprise, Trade and Employment about known problems with the business practices of Equitable Life, she added.
The financial regulator did not take over regulation of insurance companies until 2003, by which time Equitable had closed its Irish branch. Attending a meeting of the committee yesterday, Mary O'Dea, the financial regulator's consumer director, cautioned that the EU's recent approach to regulation, which concentrates on allowing for as much harmonisation of the rules across member states as possible, could actually restrict regulators from introducing certain consumer protection measures.
"In providing a common level of regulation, it would be regrettable if maximum harmonisation unduly restricted regulators like ourselves, who have a specific statutory consumer protection mandate, from raising consumer protection standards in the financial services industry," she said.
Ms McGuinness said the committee would examine this issue further.
