Fitch Ratings has warned that UK insurers are facing a tougher regulatory regime under the proposals currently being considered by the Financial Services Authority (FSA).
The agency noted that the current minimum regulatory capital requirements are generally thought to be inadequate, so company managers are desperately in need of improving their financial controls.
On the whole, Fitch said it is "broadly supportive" of the FSA's new capital adequacy proposals, but also warned that a number of important issues remain to be addressed.
Fitch also revealed in its report that around 200 firms - or 25% - of the UK industry have been placed in the 'higher risk' categories by the FSA. The FSA expects to maintain a "close and continuing dialogue" with these insurers who will be informed shortly of their status.
Fitch expressed its views on the FSA proposals in a new report called `Solvency Abuse?: The Changing Face of UK Capital Requirements'.
