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FSA to shake up insurers' capital regime

Date: Tue, 15 Jul 03 Analysis

The Financial Services Authority (FSA) is to shake up its capital regime for non-life insurers to help prevent bankruptcies in the sector.

The regulator believes that poor capital requirements are responsible for an excessively high failure rate among London market insurers over the past 20 years.

The proposals centre around creating a risk-based enhanced capital requirement (ECR) for companies, based on capital charges applied to asset and insurance risks.

The FSA will also provide individual guidance to insurers concerning the appropriate amounts of capital they should hold.

The changes would have little impact on some firms that already exceed the capital requirements, the FSA said, but could prompt other non-life insurers to raise new capital, reduce their risks, or underwrite.

'We believe that our proposals for better calibrated and more risk-sensitive capital requirements will lead to a better regime for non-life insurers,' FSA managing director John Tiner commented.

The regulator is aiming to set capital adequacy standards for regulated firms, including in the life insurance industry, for which it will publish proposals later this year.

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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.