The UK financial services watchdog, the FSA, has published a consultation document suggesting rules regarding the capital reserves enforced on life insurance companies' balance sheets could be relaxed to reduce the financial burden.
According to the Reuters, the Financial Services Authority’s suggestion could release around GBP4 billion in the balance sheets of UK life insurance firms. Meanwhile, the changes could mean cost savings per company of around GBP140 million a year.
The proposal intends to reevaluate the capital reserve to risk ratio for different life insurance products, while also freeing individual companies to take greater control of their own capital requirements.
By reducing the burden and adding flexibility to the system, the FSA hopes to bring the UK life insurance sector more in line with European standards, while also reducing costs for both providers and customers.