Giving evidence about endowment mortgages today to the Treasury Select Committee (as part of its inquiry into restoring confidence in long-term savings), insurance industry Chief Executives said:

· the primary reason for potential shortfalls in endowment mortgages was the marked change in economic circumstances associated with falling inflation and lower expected rates of investment returns;

· projections for endowment mortgages were based on illustrative rates of return laid down by the regulators. As soon as these were revised downwards in 1999, companies ensured that their customers were informed of the changed expectations;

· it was difficult to pinpoint the exact number of people facing endowment shortfalls, which varied according to changing market circumstances: but both the ABI’s estimate of around 1.5 million (based on survey evidence in 2002) and the FSA’s more recent estimate, were significantly below those originally suggested by market commentators such as Ned Cazalet;

· the content of reprojection letters sent to customers had been agreed in detail with the regulator, and they were accompanied by a separate leaflet, from the regulator, explaining how to make a complaint about possible mis-selling; customers had said that these letters were clear and understandable;

· they regretted cases of mis-selling and explained the steps their companies were taking to deal with these effectively and quickly;

· companies whose funds had closed to new business were being managed with the best interests of customers in mind, and held varying proportions of equities.  

 
ENDS

Notes

Note for Editors

1. Enquiries to:

Alan Leaman 020 7216 7440 (Mobile: 07957 482330)
Malcolm Tarling  020 7216 7410 (Mobile: 07776 147667)
Lucy Butler            020 7216 7411 (Mobile: 07712 841184)

2. The ABI is the trade association for Britain’s insurance industry. Its more than 400 member companies provide over 97% of the insurance business in the UK. We represent insurance companies to the Government, and to the regulatory and other agencies, and is an influential voice on public policy and financial services issues. ABI member companies account for more than a fifth of investments in the London Stock Exchange, on behalf of millions of pensioners and savers.

3. An ISDN line is available for interviews.                             
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