The Financial Conduct Authority (FCA) has revealed details of its investigation into the governance and management of the £1 trillion unit-linked funds sector.
Speaking at an Association of British Insurers conference in London, FCA chief executive Martin Wheatley said the review had been one of the "most important thematic reviews we’ve been working on over the last 100 days.
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Wheatley said: "The question we are asking is whether these firms are acting in their customers’ best interests. Are they allocating a fair proportion of revenue received from stock – lending to the fund – or are they recycling too much to the shareholder?"
The regulator will also investigate whether counterparty credit risk was transferred from reinsured funds to policyholders with or without the policyholder’s consent, Wheatley added.
Wheatley said that details of the review would be published in the autumn and he urged insurers to engage with it.
The regulator first revealed its plans to scrutinise the sector in January this year, having flagged the governance of unit-linked funds as an emerging risk in its Retail Conduct Risk Outlook in 2012.
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