Insurers not aware of FSA problems

FINANCIAL Services Authority chairman Sir Howard Davies was under fire today over his attack on UK insurers, with the industry saying it was unaware that most of the problems he raised even existed.

The Association of British Insurers said it did not accept his allegations that some re-insurance arrangements did nothing to transfer risks and amounted to little more than window dressing of insurers' accounts. Its comments came as the FSA admitted the complex derivative products which Davies said were of such grave concern were not actually used by UK insurers.

Davies's attack on these 'synthetic collateralised debt obligations' formed a key part of his speech on Tuesday night to the Association of Insurance and Risk Managers. He said one banker had told him these products were 'the most toxic element of the financial markets today' and the FSA was taking a 'heightened interest' in this area.

But an FSA spokeswoman said: 'We are not saying this is a big problem in the UK at the moment, it isn't. But we are looking at it now.' An ABI spokesman said the lobby group was not aware that Davies had anything to be concerned about in respect to re-insurance arrangements.