The insurance industry could see an influx of capital under plans by the FSA to create a more flexible investment vehicle.
The regulator announced this week that it intends to implement a regime whereby investors can establish insurance special purpose vehicles (ISPVs).
Andrew Hubbard, a partner at business and financial advisory firm Mazars, said: "With ISPVs you can invest in vehicles, but get your money out when it is needed.
"It makes it a much more flexible approach to investing capital and should attract investors that otherwise would not have wanted to just tie their capital up in a more long term way."
Under the EU's Reinsurance Directive each member state is allowed to implement a regime of ISPVs, which will be authorised as a reinsurance company so that it can take full advantage of reinsurance treaties and provide reinsurance to primary insurers or other reinsurance companies.
Announcing the plans, Thomas Huertas, director of the FSA's wholesale firms division, said: "We believe that the introduction of ISPVs will allow primary insurers to diversify their sources of capital."
Hubbard welcomed the move, saying: "Any initiative by the regulator that provides flexibility for the insurance market to enable companies to manage their affairs based on market conditions has to be a good thing, not just for the market, but also in terms of the position of London, its competitive position vis-à-vis other markets around the world."
The regulator will publish a consult-ation paper on the regime later this month.
Hubbard said: "Hopefully the FSA won't tie the whole thing up in regulation and red tape so that it becomes unworkable."
