The ABI has welcomed the FSAs consultation paper which proposes changes to rules for life insurers reserving and capital requirements.
The paper CP06/16 Prudential Changes for Insurers is proposing to relax the solvency rules that require life companies to keep huge reserves of capital to mitigate potential losses.
If the proposals meet with approval from the industry, insurance companies could be allowed to release some of their capital reserves to fund growth in other areas of the businesses.
The changes will affect insurance firms that are both life and non-life and will also set out further developments to the Individual Capital Assessments framework.
ABI director of financial regulation and taxation Peter Vipond says: This is a welcome and high-profile example of the FSA and industry taking forward a principles-based approach to regulation.
These reforms take up the proposals the ABI has made regarding the reform of solvency rules for insurers. They will ensure a better alignment of capital requirements to risk reducing the amount of regulatory capital insurers have to hold, whilst maintaining a high standard of protection for policyholders and investors.