Prudential has become the first company to establish an independent with-profits committee to oversee the governance and compliance of the firm's with-profits business.
One of the FSA’s key compliance requirements for the management of with-profits funds – as set out in 2003 in CP207 – asked each with-profits provider to create a document, known as the Principles and Practices of Financial Management, explaining the rules under which the firm would manage its with-profits funds and then publish those specifications for the benefit of consumers.
Alongside the requirement for a PPFM, the FSA said firms should deploy a committee - independent of the life office - to ensure the company meets its own rules and continues to act in the best interests of both policyholders and shareholders.
As a result, Prudential has appointed:
Members of the with-profits committee will meet every quarter and produce a report for the board of directors at Prudential Assurance Company detailing how effectively the firm is meeting its own principles and standards, as well as commenting on the solvency of the fund.
Issues it will consider include an independent assessment of the way in which Prudential manages its with-profits business, how the company balances the rights and interests of policyholders and shareholders in relation to its with-profits funds, and whether Prudential complies with its Principles and Practices of Financial Management.
Committee members will have the power to order the PAC board to make changes to management and governance of the with-profits funds if it feels the firm is not acting as declared under Pru's PPFM.
Whether those reports will be published will have to be agreed between the PAC board and the committee, according to a spokesman for Prudential, as there may be issues for the company to address following production of each with-profits report.
Those appointed as independent committee members have to be approved by the Financial Services Authority, under FSA with-profits PPFM rules.IFAonline
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