Insurance companies face greater scrutiny on their capital and reserving, Financial Services Authority (FSA) chairman Howard Davies has warned, following the troubles of Independent Insurance and Equitable Life.

Speaking at the FSA's annual meeting last week, Davies said the authority accepted change was needed in the regulatory regime surrounding insurance companies.

The FSA has been attacked recently over the collapse of Independent Insurance and the difficulties faced by Equitable, which stopped new business in December and dropped the value of with-profits pension funds by 16% this week.

However, Howard said the FSA had already brought together prudential and conduct of business regulation and had integrated the work of government actuaries.

“We've moved some of the largest insurance groups to our major financial groups division and we're conducting a review of with-profits policies and their regulation,” he said.

“We've also declared our intention to move to a banking-style approach to capital and reserving.”