To ask the Chancellor of the Duchy of Lancaster (1) what measures he has of the effectiveness of the monitoring by his Department of the London Life Association Ltd. life assurance company; and whether his Department has received any report on the internal management reporting and internal control systems operated by that company;(2) if his Department receives, as part of its work on monitoring the financial and trading position of life and other insurance companies, regular reports from independent accountants on the adequacy of the management information systems and internal control systems in those companies; and if he will make a statement.
My Department monitors the financial and trading position of non-life insurance companies mainly by examining the returns which insurance companies submit each year. In the case of life insurance companies, examination of the returns is carried out on behalf of my Department by the Government Actuary's Department.Regulations require that there shall be annexed to each return a certificate by directors of the company which, unless such a statement cannot truthfully be made, must state
"that for the purposes of preparing the return—
(i) proper accounts and records have been maintained and adequate information has been obtained by the company, and (ii) an appropriate system of control has been established and maintained by the company over its transactions and records".
It is also a requirement that there shall be annexed to the return a report by an auditor, who must be independent and qualified, stating, inter alia,
"in the auditors' opinion and according to the information and explanations they have received … whether it was reasonable for the persons giving the certificate to have made the statements therein."
The most recent return for London Life Association Ltd. relates to the year ended 31 December 1986, and both the directors' certificate and auditor's report are in standard form.
I am satisfied that the monitoring by my Department and the Government Actuary's Department of London Life Association Ltd. has been effective. Officials contacted the company in 1986 because of concern about its financial position and reviewed with the company the remedial action it was then taking. At the beginning of November this year, the company was asked for an update on its financial position and in particular about the impact of the stock market falls and my Department has been kept informed of the further remedial action initiated by the company, and continues to be in close touch with the company.