tax & jurisDiction
Offshore investors are likely to benefit by the UK Financial Services Authority (FSA) decision to implement reforms on the governance of life insurance firms.
These reforms include forcing managers to make the use of discretion in with-profits funds more transparent and making directors and senior management of life insurers explicitly responsible for all decisions of their business, including those taken on actuarial advice.
Christine Hall, offshore marketing manager at Axa Sun Life, said: 'Although Axa Isle of Man, being based in the Isle of Man is not directly governed by the same FSA legislation, its offshore policyholders will benefit from these proposals as AXA's offshore with-profits are reassured through its onshore parent company.
The changes should take place by March 2004. In this period, companies must define and make available to with-profits policyholders their 'Principle and Practices of Financial Management'; put in place any changes in governance arrangements and reporting to with-profits policyholders; actuaries must report to boards regarding key aspects of with-profits business.
The Principle and Practices of Financial Management will cover such issues as the company's approach to setting annual and final bonus rates and smoothing the value of with-profits contracts, the company's investment strategy for with-profits business and the management of any inherited estate and the uses to which this may be put. It will also cover the company's approach to achieving a balance between the interests of with-profits policyholders and the interests of any shareholders of the firm.
John Tiner, managing director for insurance at the FSA, said: 'These measures will benefit with-profits and other policyholders by making more transparent how discretion in with-profits funds is exercised by boards and senior management, bring policyholder liabilities within the scope of the audit, and introduce a public actuarial opinion to be published with the audit report.
'The new governance approach is closely linked to the implementation of the proposed new reporting system for life insurers, on which we are making good progress and which will bring major regulatory and business flexibility benefits to life insurers by calibrating their solvency position more closely to policyholders' liabilities and the financial risks of the firm.'
The Aviva Investors Multi-asset Funds (MAF) target equity risk rather than absolute volatility. Thomas Wells, Multi-asset Fund Manager, explains that while absolute volatility varies significantly over time, the inherent risk of investing in equities remains relatively constant.
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