Insurers are facing major reform in the way they calculate and report their solvency margins.
The warning comes in the long-awaited Tiner report which was published this morning.
For a full copy of the report go to http://www.fsa.gov.uk/pubs/policy/bnr_progress3.pdf
John Tiner, the FSA's managing director consumer, investment and insurance, said that insurers would also have to make their prudential margins more transparent.
The report also makes it clear that the FSA expects insurance firms to be more open with regulators and consumers, more responsible and accountable for senior management and better aware of the impact of their actions on consumers.
Tiner's report has three main thrusts:
- Increased openness with regulators and consumers
- Increased responsibility and accountability for senior management
- Greater awareness of the impact of insurers and managers actions on consumers
Tiner added: "This is clearly a challenging time for the insurance industry worldwide. We are ensuring that the UK's regulatory regime is sufficiently robust and flexible to cope with changes.
"The industry needs to respond not only to market pressures, but also the changing regulatory environment. The effective implementation of the new insurance regime is an immediate priority for the FSA, and consistent with this, we are in the process of carrying out "risk assessments" on the largest 200 insurance firms.
"We are also continuing our work to improve the framework that sets capital requirements for insurance firms. It is our intention to reform the calculation and reporting of solvency margin requirements including making the prudential margins more transparent."
