Insurers warn of premiums hike as FSA fees climb

Insurers have warned of a fresh hike in premiums for millions of customers after the regulator hit the financial services industry with an inflation-busting 15.6% rise in annual fees.

The FSA's latest annual funding requirement has jumped by nearly £78m to £578.4m as the regulator faces the added costs of splitting into two bodies from 2013 and overhauling its IT software.

Including the costs of the FSCS, the total bill for financial services firms will top £1.2bn.

Otto Thoresen, director-general of the Association of British Insurers, lashed out at the FSA's demands for a "massive increase" at a time the industry faces increased costs.

General insurers' contributions will jump 36.7% to £40.1m while life insurers must pay £61.1m, up 37.3%.

"In this difficult financial environment, all organisations need to be focused on controlling their costs. While insurers will do their best to absorb these costs, some will inevitably be passed on to the customers," said Thoresen.