Much is at stake in the battle over orphan assets, the surplus money that has built up over the decades in insurers’ with-profits funds. Around £14 billion has piled up in recent years at Norwich Union and the Pru alone. It is not surprising that both the companies and the five million policyholders would like to get their hands on it.

This shouldn’t be such a difficult area. In 1995, ministers set out the fairness principle that any distribution of such such assets should be in the proportion of nine-tenths to policyholders and one-tenth to shareholders. Yet, in 2000, AXA paid just 31p in the pound for the orphan assets in its with-profits fund.

That caused an immediate row and then a court battle. The Financial Services Authority’s ruling yesterday, which largely maintains the status quo, has done nothing to cool the temperature. Which?, formerly the Consumers’ Association, accuses the insurers of planning “a smash and grab raid” on policyholders’ money. Clare Spottiswoode, the former gas regulator and now advocate for Norwich Union policyholders, is more measured but still plainly incensed.

The FSA continues to allow insurers to use orphan assets as capital to write new business, to pay shareholder tax, to make strategic investments and even to pay the fines and costs related to mis-selling. This last concession is, rightly, now under review. Getting the victims of abuse to pay the fines levied on their persecutors is plain madness.

Every other use of these assets erodes the value of the estate that could be used to pay policyholders. The more they are used to seed new business, the less likely the policyholder on whose behalf they were accumulated will see any benefit. There has always been a cross subsidy from one generation of policyholders to the next, but the aim should be to reduce or eliminate it.

Expecting insurers unilaterally to kiss goodbye to these sums without a fight is asking too much. They may be bound by the Treating Customers Fairly regime, but they also owe a duty to their shareholders to explore every avenue to maximise returns and that means putting up a fight when billions are at stake.

It is up to the FSA to act as honest broker. One of its main objectives, after all, is to help consumers achieve a fair deal. It needs to push harder to secure these assets for policyholders. Otherwise the accusation that it sides with those it is meant to regulate will start to ring true.

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