In a dramatic move and as a direct result of the extremely volatile equity markets over the last few years, the industry regulator, the Financial Services Authority (FSA) has reduced solvency margins required by insurance companies to allow them to continue trading.
This is not saying that insurers are about to go under, they still have £billions. The FSA have strict regulations for financial advisers and insurers that they must have certain levels of capital assets in excess of their debts (liabilities).
Equity markets have almost halved in value over the last few years and as such the assets that insurers did have are now undervalued putting many of them close to the solvency margin were they are allowed to trade.
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