The UK Financial Services Authority (FSA) is taking a hands-on approach to prudential regulation by setting a new set of capital requirement standards for British-based insurers.

Applicable to life, general and reinsurance companies, the new requirements will see large companies having to hold capital equivalent to their statutory requirements plus calculations of their expected liabilities.

All insurers will be required to make individual assessments of their capital needs, which will be then be given to the FSA to monitor throughout the year.

FSA sector leader for insurance David Strachen said in a statement that the move “marks a step change” in the way UK insurers monitor their capital reserves.

“This is particularly important for companies which write with-profits business where provisioning and capital requirements will now be more closely linked to the payments and bonuses that policyholders expect,” he said.