L&G To Stun City By Quitting Insurers' Body
Legal & General (L&G), Britain's biggest pension fund manager, will stun the City on Wednesday when it discloses that it is terminating its membership of the insurance industry's flagship trade body.
Sky News has learnt that L&G is expected to make a statement declaring that it has decided to cease being a member of the Association of British Insurers (ABI).
As a major player in the UK general insurance market, L&G's decision is likely to trigger a heated debate across the industry, which employs approximately 320,000 people.
The reasons for L&G's decision were unclear on Tuesday night, although City sources speculated that the recent separation of the ABI's investment affairs mandate, which is responsible for engaging with companies on issues such as corporate governance, was likely to have been one factor.
Investment UK, another body, is to assume oversight of institutional shareholders' interaction with listed companies, a dialogue in which L&G's fund management will play a leading role.
L&G is also understood to believe that it will be able to lobby more effectively on significant issues affecting its business if it does so on its own.
L&G's move away from the ABI will mean that Nigel Wilson, the company's chief executive, will step down from the trade association's board, which until two years ago was chaired by Mr Wilson's predecessor, Tim Breedon.
A competitor of L&G criticised its move to walk away from the ABI, accusing it of grandstanding and warning that it could undermine the industry's ability to influence key policy areas in the UK and further afield at a time when the insurance sector faces a tough new regulatory regime.
Mr Wilson has been an outspoken critic of a range of Government policies, such as its approach to infrastructure investment and insurance regulation.
Reporting strong financial results last week, he argued that the UK should quit the European Union unless it could negotiate a superior settlement for itself with Brussels.
The ABI, which is led by Otto Thoresen, its director-general, has around 300 members which collectively account for more than 90% of the UK insurance market.
In recent months, it has taken a lead on negotiating issues such as the creation of Flood Re, a new body to insure homes at significant risk of flooding, and the rising cost of premiums for young drivers.
The ABI's board also includes prominent insurance industry bosses such as Stephen Hester, chief executive of RSA, and Paul Geddes, who heads Direct Line Group.
An ABI spokesman said it would issue a statement about the situation on Wednesday, while L&G declined to comment