Insurers could do better on risk management, the FSA has said.
The regulator has praised the industry for its improvements in risk management over the past few years, but has highlighted there is some way to go.
The FSA's Insurance Sector Briefing also analyses the impact of Individual Capital Adequacy Standards (ICAS) on the market
Sarah Wilson, FSA insurance sector leader, commented: "Since our previous review of insurers' risk management practices in 2003, there has been substantial progress. Our new risk-based capital adequacy regime under the ICAS framework may have acted as one catalyst for change for some firms but should not be viewed as a substitute for good risk management practices. Instead we would expect ICAS to be used as one of many tools in an integrated approach to risk and capital management.
"We believe that, whilst ICAS has placed the UK industry in good stead for the implementation of the new EU risk-based capital adequacy regime, firms must have in place fully integrated risk and capital management frameworks across their business activities to benefit fully from the implementation of Solvency II.
"We hope firms will find useful pointers from the outcome of the Review and will consider the questions we have posed in assessing and developing their risk management practices."
