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Life insurance companies face FSA demands

Fri, 13 Feb 2009

The Financial Services Authority has called for life insurance companies to make certain they hold enough capital in reserve to survive further market shocks. Life insurance companies must now test to see whether their capital buffer could withstand reductions in equity markets and increases in bond defaults.

Life companies will have to carry out the exercise before releasing their preliminary results. Fears are rampant in the life insurance sector that conserving capital may force cutting of dividends or raising of further money.

At this stage, the FSA is declining to comment, but some life insurance companies have highlighted the extra stress the exercise is causing. One life insurance expert compared the FSA to a police force that continually adjusts the crime laws.
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