The FSA consultation on enhanced capital requirements and individual capital assessments (CP 195) is an important milestone for life insurers, according to the ABI (Association of British Insurers).  The ABI believes that this consultation document builds on the FSA’s work towards a risk based regulatory framework for life insurance companies.

The ABI’s response to CP 195:
· welcomes moves to a realistic basis for measuring with-profits liabilities to policyholders - this will allow firms to make better use of their capital in supporting their with profits business, and it will enable the FSA to have a sharper measure of firms’ assets and liabilities;
· calls for increased clarity in the use of a rating agency “BBB” rating for supervisory purposes, in order to recognise the differences between regulating financial firms and rating capital products;
· stresses the need to move toward a common definition of capital between banking and insurance, as far as current EU directives allow, and then more fundamentally with the advent of Solvency II.

Peter Vipond, the ABI’s Head of Financial Regulation and Taxation said:
“The approach in CP195 is right.  A realistic basis represents the way forward and offers the best prospects for protecting policyholders and shareholders. Parts of CP195 will require considerable additional work before they can be implemented next summer, but the industry is willing to work with the FSA to make these proposals a success.  These proposals should have real relevance for future work on European and international standards”.

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Notes

Note for Editors

1. A copy of the ABI’s response to CP195 is available from the ABI website www.abi.org.uk.  CP195: Enhanced Capital Requirements and Individual Capital Assessments for Life Insurers consults on life insurers capital requirements was first published by the FSA in August 2003.

2. Enquiries to: 
 Alan Leaman  020 7216 7440 (Mobile: 07957 482330)
  Emma Quantrill  020 7216 7392 (Mobile: 07712 841183)
 Malcolm Tarling  020 7216 7410 (Mobile: 07776 147667)
 Lucy Butler  020 7216 7411 (Mobile: 07712 841184)

3. The ABI is the trade association for Britain’s insurance industry. Its more than 400 member companies provide over 97% of the insurance business in the UK. It represents insurance companies to the Government, and to the regulatory and other agencies, and is an influential voice on public policy and financial services issues. ABI member companies hold more than a fifth of all investments traded on the London Stock Exchange, on behalf of millions of pensioners and savers.

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Copies of all ABI news releases, together with other information from the Association, can be seen on our website http://www.abi.org.uk