STOCKS NEWS EUROPE-UK insurers hit by regulator's policy probe

UK insurers fall sharply in heavy volume on news that Britain's financial watchdog is planning to investigate whether people sold pensions and savings plans in the past were treated fairly compared to new clients.

British life insurer Resolution falls 10 percent to a nine-month low, on course to post its biggest daily fall in five years, Aviva (Other OTC: AIVAF - news) is down 6.9 percent, Legal & General (LSE: LGEN.L - news) falls 4.9 percent and Prudential (Frankfurt: PRU.F - news) drops 1.7 percent.

That collective hit weighs on the STOXX Europe 600 Insurance Index, to leave it down 0.6 percent, the only sectoral faller across Europe.

It also comes in heavy volume, with Resolution and Aviva trading at nearly 1-1/2 times their three-month daily average after just over an hour of trade. That compares to an average of less than 20 percent for the FTSE 100 as a whole.

"Should investors be allowed to exit policies and look for a better deal, the sector may be punished with large out-flows of money from some zombie funds," Mike van Dulken, head of research at Accendo Markets, says.

UK insurers are already under pressure following a shakeup of the pensions system announced by finance minister George Osborne in his budget earlier this month.

The reforms, due to be implemented in April next year, effectively scrap a system forcing most retirees to swap their pension savings for an annuity that pays out an income for life, giving them instead a choice in how they invest.

Reuters messaging rm://atul.prakash.thomsonreuters.com@reuters.net