Legal & General has become the first insurer to have its solvency requirements relaxed by the Financial Services Authority (FSA).

But the group stressed it remained solvent and had only applied for the waiver to prevent it being forced to sell shares in a volatile market.

Yesterday's move comes after the FSA wrote to chief executives of life insurance firms in January saying they could apply to have particular rules relating to the way they calculate their solvency margins waived to prevent them being forced to sell off equities.

The solvency margin measures the level of assets insurers have after meeting all their liabilities.

However, recent stock market falls have put increasing pressure on firms' solvency margins, forcing them to sell off equities, often at low prices, so they can hold the money in cash.

L&G, which has offices in Hove, has been granted a waiver allowing it to calculate the value of its liabilities on a more "realistic" basis, which the FSA plans to introduce as the standard measure for assessing liabilities in 2004.

An L&G spokesman said: "We thought it was a sensible move as there is pressure on financial services companies to sell shares to maintain solvency ratios."

An FSA spokeswoman said: "We invited applications because some firms' regulatory solvency positions do not reflect their real position."