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Resolution crashes 10% on insurance policy investigation

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Resolution crashes 10% on insurance policy investigation

Resolution tumbled more than 10% in early trading amid a sharp slump in the value of the insurance sector following the announcement of an investigation into historical life and pensions policies.

St James Place was among those hit, sliding 3.07%. Aviva fell 6.1%, L&G dropped 4.37%, Standard Life fell 2.8% and Prudential 1.55%.

The sell-off followed a Daily Telegraph report that the Financial Conduct Authority is to investigate the terms of 30 million insurance policies written between the 1970s and the 2000s.

The investigation, due to begin this summer, will probe the ongoing terms of pensions, endowments, investment bonds and life insurance, historically sold with high commission payments to advisers.

It will focus on the ‘zombie’ funds of closed life business – the area in which Resolution has successfully built an ongoing insurance business through consolidation.

The announcement is the second major hit to the insurance sector in as many weeks, following the liberalisation of pensions annuities announced in the Budget. The FTSE 350 Insurance sector has fallen more than 8% since mid-March, versus a marginal gain by the FTSE 100 over the same period. 

'We want to find out how closed-book products are being serviced by insurance companies, as we are concerned insurers are allocating an unfair amount of overheads to historic funds,' FCA director of supervision Clive Adamson told the Telegraph.

'As firms cut prices and create new products, there is a danger that customers with older contracts are forgotten. We want to ensure they get a fair deal. As part of the review we will collect information to establish whether we need to intervene on exit charges.'

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