The ABI has welcomed the FSA's introduction of individual capital adequacy standards (ICAS) but said that the regulator has to be careful not to overburden the industry with capital requirements.
The insurers' organisation advised that legacy regulation should be abolished, where possible.
The ABI's comments followed the publication of the FSA's briefing - ICAS: one year on.
Speaking at an ABI member conference on insurance financial regulation, Peter Vipond, director of financial regulation and taxation at the ABI said: "[ICAS] is more sophisticated when dealing with diversification and operational risks and encourages improved dialogue between insurance companies and their regulator.
"ICAS provides consumers with the reassurance that [a] UK supervisory approach promotes good risk management and sound financial management.
"Provided that it is implemented 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."
