§ Mr. Cousins
To ask the Chancellor of the Exchequer on how many occasions the Government have intervened to protect the reasonable expectations of policyholders using their powers under the Insurance Companies Act 1982; and what guidance has been given as to the meaning of the term, "the reasonable expectation of the policy holders". 
§ Mrs. Liddell
[holding answer 29 June 1998]: Sections 38 to 45 of the Insurance Companies Act 1982 give the Treasury a wide range of powers of intervention, which are regularly used to protect policyholders' interests. With regard to the reasonable expectation of policyholders, the most relevant power is likely to be Section 45 of the Act which gives the Treasury power to intervene in individual companies' affairs to protect policyholders against the risk that the company may be unable to meet its liabilities or—in the case of long term business—fulfil the reasonable expectations of policyholders. This is a reserve power, which may be exercised only where the Treasury consider that the purpose cannot be appropriately achieved by exercise of the other, more specific, powers conferred by sections 38 to 44 of the Act or by the exercise of those powers alone.
I am not aware of any occasion on which formal use has been made of section 45 for the specific purpose of protecting policyholders' reasonable expectations. But the mere existence of the power has to date been sufficient to make such exercise unnecessary. In practice, Chancellors of the Exchequer, as successive regulators, have been able to protect policyholders' interests by influencing companies' behaviour through discussion and agreement.
Guidance on the Government's view of policyholders' reasonable expectations was set out in a statement by the then Under-Secretary for Corporate Affairs on 24 February 1995, Official Report, columns 360–61. This set out a number of factors which the Government considered influenced such expectations, in respect of attribution of surplus between policyholders and shareholders in the long term funds of life insurance companies.