Life insurers gone bust Prudential Sourcebook

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Equitable life was a prominent life insurer who went bust after a decline in the stock market and didn't have enough cash reserves to meet payouts. Many small investors lost out and the industry was in shock.

The FSA - Financial Services authority wanted to make sure that other life insurers were on a firm financial footing and introduced the Interim Prudential Source Book. This required firms to report on how financially healthy they were, and depending on the results the FSA then decided how much reserves the firm would have to hold to cover expected and potential future payouts. If the firm didn't have the cash to hold the reserves, the FSA would intervine and plans would be formed to rectify the situation.

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