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FSA confirms further delay for new insurance principles

Date: Mon, 16 Feb 04 Analysis

LONDON, UK - Moves by the Financial Services Authority to extend the deadline for life insurers to comply with new principles on how they run their with-profits funds have sparked fears that the new regime for the insurance injury is in disarray.

The FSA's director of insurance David Strachan last week informed all life insurance chief executives in the UK that the regulator was to delay the implementation of the implementing the so-called principles and practices of financial management (PPFM) rules by one month to April 30th.

The indications are that the insurance industry is also struggling to cope with the new reporting regime, which require companies to change the way that they calculate their solvency and to set aside more capital to pay for guarantees on policies.

The new regime has clearly disturbed the market, reflected in last month's announcement by Standard Life that the mutual insurer was considering floating on the stock exchange to address its weakening capital position under the new rules.

According to the Scotsman, the letter blames the decision to put back the deadline for the PPFM document on "developments over recent weeks, including further work that some firms have themselves been doing on market-consistent modelling of guarantees and the acceptability of consequent management actions".

The FSA agreed to further consultation with the industry on whether its model for calculating long-term liabilities for insurers was appropriate with each insurer required to publish a PPFM document outlining its approach to setting annual and final bonus payments to policyholders, the way it will smooth returns over time for with-profits funds and the group's investment strategy.

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Endsleigh Insurance Services Limited is authorised and regulated by the Financial Services Authority. This can be checked on the FSA Register by visiting its web site at www.fsa.gov.uk/register.
Endsleigh Insurance Services Limited. Company No: 856706 registered in England at Shurdington Road, Cheltenham Spa, Gloucestershire GL51 4UE.