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Government actuaries are to be investigated over their alleged failure to spot the problems that pushed Equitable Life to the brink of collapse, it emerged yesterday.
If the professional body carrying out the inquiry finds evidence of misconduct, it has the power to ban people from practising and to impose unlimited fines.
Such a finding would be embarrassing for the government, which has been resisting demands that it compensate those who lost their money in the Equitable Life scandal.
About one million customers saw their retirement savings slashed when the world's oldest mutual insurer was plunged into chaos by a court ruling almost 10 years ago.
This is the 14th investigation into the problems that beset the company, and follows criticism of the Government Actuary's Department (GAD) by Lord Penrose and the parliamentary ombudsman.
The Accountancy and Actuarial Discipline Board - the independent body for the professions - said that it was investigating "the conduct of certain members in relation to the provision of advice [to the various regulators policing Equitable Life between 1990 and 2001] by or on behalf of the Government Actuary's Department."
The board said it was not possible to say how long the investigation would take. The disciplinary board has not named any individuals, though those being investigated are thought to include Chris Daykin, who was the chief government actuary and head of the GAD for 18 years until September 2007.
Penrose's report was scathing about the GAD, saying that its scrutiny was "complacent, lacking in challenge and hesitant in criticism".
This year, Ann Abraham, the parliamentary ombudsman, said the GAD was guilty of maladministration in relation to its regulation of the insurer.
She concluded that during the period before July 1998, when the problems that eventually forced the company to close its doors to new business were developing, the GAD and other bodies undertook their duties in a "passive, reactive and complacent" manner.
Failings included permitting one person to hold the roles of Equitable chief executive and appointed actuary for more than six years.
This neutralised "the ability of the regulators to rely on the appointed actuary, who held a central role as a 'whistleblower' in the system of prudential regulation", Abraham said.
In July she recommended that a scheme be set up to compensate people for the losses they would have avoided had they taken their money elsewhere. This could run into billions of pounds.
The government promised to respond to her report in the autumn and is sticking to this line, prompting growing anger among campaigners and MPs.
The Equitable Members Action Group said the announcement was "good news" but added that its primary concern was seeking compensation for those who lost money as a result of the insurer's problems.
The GAD said it was aware of the investigation but could not make any comment.
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