The FSA’s new prudential requirements for UK insurance firms took effect last week.
The new requirements require firms to take an integrated view of the risks that they face as insurers and how much capital they should hold against them.
The FSA says this means the capital held by insurance companies will be more closely matched to the risks of the business that they write.
FSA sector leader for insurance David Strachan says: “The new capital requirements lie at the very heart of the FSA’s reform programme for UK insurers. The new capital framework will ultimately lead to a stronger and healthier insurance industry; and it will increase consumers’ confidence that insurers are managing their risks effectively and are therefore better able to meet the commitments that they have made to their policyholders.”