Daykin eases pressure on insurers' solvency ratios

THE STOCK market has been saved from a potential major sell- off by insurance companies because the Government Actuary has made the solvency ratio rules more flexible.

Chris Daykin, the Government Actuary, has written to life insurance companies saying that they may breach some of what were seen as inviolable regulatory requirements.

Mr Daykin said the letter was sent to reassure worried insurance companies that had run up against minimum funding requirements following the recent slump in equity prices.

Mr Daykin and the Department of Trade and Industry monitor insurers closely to ensure they have the money to make payouts. Life companies hold assets in many forms, including bonds and shares, but are required to hold enough funds to meet claims even if share prices, and thus asset values, drop.

A spokesman for the DTI said yesterday that to talk of relaxing the rules was alarmist. Mr Daykin had simply re-affirmed the original intentions.

Mr Daykin is prepared to relax the regulations only if companies consult his office. The one rule is that life companies must have enough liquidity to meet commitments, and have something to spare, if share prices fall 25 per cent.

The summer's 15 per cent slump in share prices means life insurers are much nearer the point when they may break into the 25 per cent cushion.

Without Mr Daykin's allowance, some life companies would have been obliged to switch from shares into less volatile investments like bonds. Several smaller institutions are believed to have switched already from equities to bonds.

On Thursday the FT-SE 100 Index ended seven successive falls with two days of rises. Selling by big institutions to comply with solvency ratio requirements could have sent the markets down further.

Mr Daykin does not propose that the 25 per cent rule be abandoned but that companies be able to work with a 20 or 22 per cent margin.

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When I was supporting Ray La Montagne I was six months pregnant. He had been touring for a year and he was exhausted and full of the cold. I was feeling motherly, so I would leave presents for him and his band: Tunnock's Tea Cakes, cold remedies and proper tea. Ray seemed painfully shy. He hardly spoke, hardly looked at you in the face. I felt like a dick speaking to him, but said "hi" every day. </p>
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He was being courted by the same record company who had signed me and subsequently let me go, and I wanted him to know that there were people around who didn't want anything from him. At the Shepherds Bush Empire in London, on the last night of the tour, Ray stopped in his set to thank me for doing the support. He said I was a really good songwriter and people should buy my stuff. I was taken aback and felt emotionally overwhelmed. Later that year, just before I had my boy Louis, I was l asleep in bed with Radio 4 on when Louis moved around in my belly and woke me up. Ray was doing a session on the World Service. </p>
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