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FSA launches investigation into with profits insurance sector

The Financial Services Authority (FSA) has launched an investigation into the with profits insurance sector amid concerns that communications with policyholders and the performance of these funds may not be as good as it should be. After completing a review of 17 companies, which control 80% of the assets held in the UK with profits fund sector, the FSA has launched investigations into two individual companies who have so far as yet remained unnamed.

There has been some concern over the last couple of years that the performance of with profits funds has been a little disappointing and very difficult to gauge. In simple terms, investment returns are placed to one side and a smoothing operation is instigated to ensure the increase in "guaranteed payouts" is steady rather than volatile. However, the FSA is concerned that the relationship between managers overseeing the performance of these funds and investment managers should be a little more arms length.

The FSA is simply looking to increase the protection for UK investors in what has been a very popular field of the UK personal finance arena. We should hear more information as the investigation proceeds and the final report, whenever that may be released, should make interesting reading.

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