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Member, Beacon International Group, Ltd.
LONDON--The Financial Services Authority has produced a set of proposals for regulatory reform of the United Kingdom's insurance industry that includes guidance about reporting of financial reinsurance contracts.
The London-based FSA, the U.K.'s insurance regulator, published on Monday a consultation paper, "Prudential Changes for Insurers", which outlines among other things further guidance on companies' individual capital assessments.
The FSA said that from October 2006, new rules would come into effect, requiring companies to make "appropriate disclosures" in their financial reports about the existence of, and effect on their capital resources of, financial reinsurance contracts or similar arrangements.The changes will apply to financial years ending on, or after, December 31, 2006, the FSA said.
In addition, companies will be required to consider each individual reinsurance contract, and the combined effect of all reinsurance contracts, "where it was predictable at the time they were written, that they would have the effect of financial reinsurance."
The FSA also set out its proposals for implementing the European Union's directive on reinsurance, which must be implemented in all E.U. member states by December 2007, and which sets out a harmonized regulatory regime for reinsurance.
Within those proposals, the FSA said it would introduce a "fit for purpose regime" to encourage the use of insurance special purpose vehicles.
The FSA said that it would not make any changes to the enhanced capital requirements for insurers ahead of the introduction of Solvency II--the risk-based capital regime for European insurers, slated for introduction in 2010.