Revolving doors

Another piece in the latest Eye (issue 1489 p.40) covering David Rule’s appearance before the Treasury Committee (Eumaeus ).

The article speculates on why the PRA now wants the ERM market to grow on a ‘properly reserved basis’, given that it could have wanted this before. Could it be the clubby way that the system operates?

Setting aside suitable amounts for a rainy day is the preserve of insurance company actuaries and those at the financial regulators who set the rules and ensure they are followed. But this operates in a clubby manner, to say the least, with one of the most rapidly revolving doors in Britain to be found between regulators and the companies and consultants who help them take a more aggressive view – boosting short-term profits from which directors and shareholders can pocket larger bonuses and dividends, but increasing longer-term danger.

It goes on to mention Julian Adams (previous director of Insurance) who is now head of government and regulatory affairs at Prudential, Andrew Bulley, ‘Adam’s underling’ (!) who now advises companies on making the best of regulations he made up, and some other PRA staffers who have headed one way or another through the revolving door.

It omits to mention Chris Moulder (KPMG, director of PRA general insurance supervision, now non-executive at Ecclesiastical), and Giles Fairhead, now director of something or other at Pension Insurance Corporation, another of those companies that borrow from pensioners at close to gilts, then invest in ‘higher yielding’ but perfectly safe assets. Plus a full house of staffers at working level  heading in various directions through the door. Never have so many etc. (Although Rule himself, as far as I know, is serving a Bank of England life sentence).

Was this club culture the main reason why it took close to four years to value a set of simple European options? Who can say.

The article closes on the positive note that the PRA needs to focus on the assets backing pension pots, ‘as those who saved with the last life insurance actuarial screw up, Equitable Life, could surely testify’.