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ABI backs FSA’s capital adequacy framework

The Association of British Insurers has thrown its weight behind the FSA’s new capital-adequacy regime but has warned that the regulator must not overburden the industry.

The FSA has just published a review of its individual capital-adequacy standards reg-ime for insurance companies one year after its launch.

Under Icas, a firm is req-uired to undertake regular assessments of the amount and quality of capital which in its view is adequate for the size and nature of its business – the ICA.

The FSA then reviews firms’ Icas and gives its own view of adequate capital for each firm. In its report, the FSA says it has had Icas from nearly 100 life and general insur-ance firms.

Speaking at an ABI member conference last week on insurance regulation, ABI director of financial regulation Peter Vipond said the ABI supp- orts the FSA’s work on capital adequacy requirements but sounded a warning about over-regulation.

He said: “The UK’s insurance sector now has a sys- tem of supervision which is more advanced than other EU systems. Icas provides consumers with the reassurance that the UK supervisory approach promotes good risk management and sound fin-ancial management.

“Provided that it is imp-lemented with care for the overall cost of capital requirements and that legacy regulation is abolished wherever legally possible, the new framework will be good for firms as well as for the FSA.”

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