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The Actuary The magazine of the Institute & Faculty of Actuaries

FSA publishes PS04/16

Early July saw the publication by the UK Financial Services Authority (FSA) of near-final text for the Integrated Prudential Sourcebook for Insurers. Based on last year’s consultative papers CP190 and CP195, a key element of the draft sourcebook is the FSA’s stipulated approach to capital requirements for non-life insurance, with-profits life assurance, and reinsurance.

The industry professed itself pleased that the FSA had acted on criticism of its original proposals, particularly in relation to the ‘Pillar 1’ risk capital margin for life with-profits business. Based on analysis by Watson Wyatt, the requirements are less onerous than set out in CP195. Nevertheless some concern remained that the proposals might adversely impact investment by insurers in some forms of corporate debt and in equities.

These proposals are due to be finalised for the 2004 year end for life assurance, although the corresponding non-life requirements will remain a matter for private reporting only for the time being. (See comment on changed roles for actuaries on p21).